MBA forecasts an eye-watering figure for 2021
Purchase originations are on track to grow 16.4% to a new record of $1.67 trillion in 2021, according to the Mortgage Bankers Association.
“The housing market is incredibly strong this year, with robust housing demand in nearly every part of the country, driven by the improving economy, households seeking more indoor and outdoor space, millennials reaching their prime home-buying years, and still-low mortgage rates,” said Mike Fratantoni, MBA chief economist and senior vice president for research and industry technology. “A lack of supply is the biggest hurdle to an even larger increase in home sales. The widening imbalance of supply and demand is driving up home-price growth and eroding affordability, especially for entry-level buyers.”
Last year saw a record $3.83 trillion in mortgage originations. MBA forecasts volume to fall 14% this year to $3.28 trillion, which would still be the third-highest total ever. Mortgage rates are expected to keep rising to around 3.7%, driving a further slowdown in refinance demand. Refi originations are expected to drop by 33% to $1.62 trillion.
“Refinance volume has already trailed off because of the steep climb in mortgage rates since January,” Fratantoni said. “Mortgage lenders should continue to prepare for the transition to a strong purchase market and slowing refinance activity.”
Read more: US mortgage rates return to sub-3%
Fratantoni said that the American Rescue Plan and the COVID-19 vaccine rollout will continue to stimulate the economy, households and businesses through the summer. He predicted that economic growth would jump to 6.5% this year, an improvement over the pandemic-driven 2.4% contraction in 2020.
“The economy will continue to recover, with rapid job growth, particularly in the hardest-hit service sectors of the economy,” he said. “The job growth is certainly positive, but this environment sets the state for higher mortgage rates and faster inflation. However, if housing inventory levels improve and help to keep affordability in check, home sales should remain strong into 2022.”