The anticipated tapering of the Federal Reserve’s quantitative easing program toward the end of this year portends additional interest rate hikes ahead according to CoreLogic’s President and Chief Executive Officer Anand Nallathambi.
He said, “The transition from rate-driven to a value-driven purchase market is important to achieving a healthy mortgage industry over the longer run. As purchase volumes continue to slowly rebound, we expect to see a flight to quality because borrowers value service and an end-to-end loan origination experience that is smooth as possible.”
Nallathambi went on to say another factor shaping the purchase loan market is cash sales. Driven by investor purchases over the past 24 months, cash purchase has reduced inventories and spurred higher prices. As we move forward, the company expects cash purchase activity to return to historical norms with an increased demand for mortgage financing.
The September MarketPulse report found that long-run potential GDP growth is estimated to be approximately 1.75 percent today as opposed to 3.5 percent prior to the recession. Single family housing starts have moderated recently, influenced by rising mortgage interest rates. The housing sector has played a pivotal role in driving GDP growth since late 2011, but rising rates will modestly temper the contribution moving forward.
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