January 4th, 2011

The 8 most important factors for 2011’s mortgage market



Whats Next What’s going to drive the mortgage market in 2011? Will credit standards ease in this year? Are mortgage rates expected to rise throughout the year? For the answers to these questions and more, be sure to read’s 2011 outlook for the mortgage market: “The 8 most important factors for 2011’s mortgage market.”

Some of you may remember our 2010 forecast which examined the 10 most important factors for last year’s mortgage market. Last year we even revised our outlook in early July to give readers a more up-to-date assessment of how the market was doing and how well our forecast had fared mid-way through the year.

This year’s outlook is slightly different. For starters, we’re examining only eight factors since a couple of the federal programs we examined last time have expired. While certain topics — such as the Consumer Finance Protection Bureau — are still in the news, we explore new subjects such as HAMP.

Here’s just a sample of our 2011 outlook, so be sure to read “The 8 most important factors for 2011’s mortgage market” in its entirety:

4. Homebuyers Return in Greater Numbers. We’ll stop short of calling 2011 “the year of the homebuyer,” but the gentle improvement in the labor market, still-low interest rates and what should be gradually easier lending conditions seem to us likely to foster a stronger housing market.

Whether we see easier lending conditions depends upon Fannie and Freddie reform, a resurrection of private secondary markets and whether or not consumers find an appetite for mortgage products that banks prefer to put in their own portfolios and can exercise full underwriting control over, such as ARMs. Few banks want to hold sizable portfolios of low-yielding, long-term fixed-rate mortgages, and so the vast majority of those are sold to Fannie and Freddie and are thus beholden to their standards. Without a competitive private market, the restrictive standards put in place by the GSEs over the last couple of years will continue to be the only game in town, and will serve to continue to limit access to the cheapest mortgage credit.

With only one private offering of a new Mortgage-Backed Security in 2010 — a “best of the best” package of loans early in the year — and financial market reforms still being digested, it does seem unlikely that we’ll see a huge swing away from tight underwriting standards, but could see some nibbling around the edges. This perhaps may come in the form of some flexibilities in borrower employment histories, for example.

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3 Responses to “The 8 most important factors for 2011’s mortgage market”

  1. Tweets that mention The 8 most important factors for 2011’s mortgage market | HSH Financial News Blog -- Says: January 4th, 2011 at 8:09 pm

    [...] This post was mentioned on Twitter by HSH Associates. HSH Associates said: The 8 most important factors for 2011’s mortgage market: What’s going to drive the mortgage market in 2011? Wil… [...]

  2. Julie Kinnear Says: January 5th, 2011 at 5:00 pm

    Finally an optimistic set of forecasts, I have been reading truly horrifying predictions lately. The worst think is that they made quite obvious sense. I don’t see housing prices development as a factor here, don’t you consider it that important? I think that with prices sinking fast we could get a whole different picture.

  3. Tim Manni Says: January 6th, 2011 at 9:25 am

    Hey Julie,

    Thanks for commenting. I think the general consensus on home prices is that they won’t be rising all that much, if any, in 2011. We absolutely consider home prices as an important factor to economic improvement. I’ve even touched on it several times in the blog (although not recently) —

    I agree with you, if we see a dramatic drop in prices this year, I think the overall picture of recovery will change.

    Thanks again for your comment, hope to hear from you again soon,

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Tim Manni

Tim Manni is the Managing Editor of and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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