"The health of the real estate finance market is directly dependent on jobs creation, and we anticipate significant jobs growth through 2004 and into 2005," said Douglas Duncan, MBA senior vice president and chief economist. "Rapid economic growth and higher incomes associated with productivity growth will generate job creation and bring employment levels up to 133 million by 2005. The civilian unemployment rate will gradually decline from the 6.2 percent peak in the second quarter to a healthy 5.6 percent by the end of 2005."

Mortgage rates will gradually increase from 5.9 percent in the third quarter of 2003, reaching only 7 percent in 2005, with single-family home production and purchases remaining robust, according to the report. The multifamily residential and commercial sector should pick up in the second half of next year and retain its strength through 2005, the report said.

The MBA projected that single-family mortgage originations in 2003 will break records in the purchase and refinance markets. Refinancings will total $2.2 trillion in 2003 and will represent 66 percent of originations. In contrast, refinancings only will account for 21 percent of total originations by 2005. Purchase originations will essentially remain flat at $1.1 trillion from 2003 to 2004, but increase to $1.2 trillion in 2005, the report said.