Recession Over, But Impact Will Continue Next Year

According to the Mortgage Bankers Association's forecast for 2010, the good news is that the recession is over; the bad news is that the country will continue to reel from the ramifications next year.

By: Barbra Murray, Contributing Editor

According to the Mortgage Bankers Association’s forecast for 2010, the good news is that the recession is over; the bad news is that the country will continue to reel from the ramifications next year.

Plenty is in store for 2010. The report concludes that the nation will continue to experience economic growth through the end of 2009, and will begin a slowdown in the first half of next year. The climb in unemployment will persist, hitting 10.2 percent before it begins to moderate in the second half of the year. Additionally, fixed mortgage rates will average approximately 5 percent in the fourth quarter of this year, and rise to 5.6 percent one year later. As per the report, 2010 will bring $1.5 trillion in mortgage originations and, with the increase in mortgage rates, refinance originations will drop to $745 billion in 2010 from $1.245 trillion in 2009.

Recovery is on tap, but various factors prevent experts from pinpointing just when it will be felt. “One of the big questions regarding growth will be the behavior of consumers,” Jay Brinkmann, MBA’s chief economist and senior vice president for research and economics, said in a prepared statement. “Timing of the economic recovery is very much tied to the growth in consumer spending.”

Interest rates are the X-factor. “While the lack of inflation, high unemployment and excess capacity in the economy should hold interest rates down, there is a lot of uncertainty regarding rates immediately following the termination of the Federal Reserve’s purchase of mortgage-backed securities,” Brinkmann noted. “No doubt the Fed will do its best to minimize adverse effects, but the elimination of these purchases will put upward pressure on all long-term rates as well as the spread between mortgage rates and Treasuries. The size of any resulting rate move will largely determine the size of the refinance market.”