Mortgage creation to drop below $2 trln in 2008: MBA

NEW YORK (Reuters) - Mortgage creation will slump 16 percent in 2008 to $1.96 trillion, breaching $2 trillion for the first time since 2000, according to the Mortgage Bankers Association.

Economic growth will slow through the first half of this year, helping depress loan creation from $2.34 trillion in 2007, the trade group said on Monday.

Loan origination will slide by an additional 4 percent in 2009 to $1.88 trillion, starkly below the $3.8 trillion peak set in 2003, the MBA predicted.

"Employment growth has slowed significantly from the pace early in 2007 with the December data reporting a decline in private sector payrolls," said Doug Duncan, the MBA's chief economist, in a statement. "High gasoline and food prices are siphoning off purchasing power. Home prices are falling and will likely continue to decline."

Average 30-year mortgage rates will rise slightly to 6.2 percent by the fourth quarter, "still quite low by historic standards," he said.

The MBA's forecasts are for housing starts and sales to reach bottom around the end of the third quarter of 2008.

Total existing home sales this year will drop about 13 percent to an annual 4.94 million units, before rising by about 4 percent in 2009.

Sales of new homes will fall about 15 percent this year to 666,000 units before rising around 7 percent in 2009.

Median home prices for new and existing homes should fall this year. Nominal median prices will drop about 2 percent and then rise by up to 2 percent next year.