Total mortgage originations, including purchasing andrefinancing applications, declined by 16% in the fourth quarter of2016 to 470,000 from 561,000 in the third quarter of 2016,according to Brian Turner, president and chief economist ofMeridian Economics in Plano, Texas.

Based on Meridian's analysis of federal data, mortgage applications totaled 232,000 in the fourth quarterdown from 298,000 in the third quarter. In addition, refinanceapplications amounted to 238,000 in the last quarter of last year,down from 263,000 in the third quarter.

Although total mortgage originations fell to 470,000 in 2016'sfinal quarter, it was higher than the 405,000 mortgage originationsat the end of the fourth quarter of 2015.

Mortgage originations in the first quarter of last year totaled350,000, then shot up to 510,000 in the second quarter and 561,000in the third quarter.

“Home purchase volume has been supported by an improved jobmarket, a younger generation slowly moving toward homeownership ageand additional move-up buying,” Turner said. “Refinance volumepicked up last quarter but is [expected] to slide, decreasing to$471 billion from $901 billion in 2016, as rates increase around 80basis points on average from 2016 to 2017.”

The refi applications increased from a low of 165,000 in thefirst quarter of 2016 and increased to 235,000 in the secondquarter and 263,000 in the third quarter. However, refiapplications dropped to 238,000 in the last quarter of lastyear.

“After previous waves of refinancing over the past three years,a large portion of borrowers have locked into lower rates and thereare fewer left to take advantage of current rate levels,” Turnersaid. “I expect any remaining refinance borrowing will be fromborrowers still rebuilding home equity or borrowers who might wanta cash-out refinance.”

However, as rates begin to increase, current borrowers withrecord low interest rates may be hesitant to use cash-outrefinancing as a means of accessing their home equity. This maylead to greater use of HELOCs, personal loans or other debt to finance homeimprovements and other big ticket items, he said.

Although new home sales in 2016 totaled 563,000, the highestlevel in nine years, both headwinds and tailwinds are expected forhomebuyers throughout 2017.

Homebuyers may face headwinds of higher mortgage rates, lowexisting inventory and uncertainties of new tax policies from theTrump administration, according to Ralph McLaughlin, chiefeconomist for Trulia. However, near full employment and rising wages are strong tailwinds that maypush new home sales higher this year, he said.