Blog posted On December 01, 2020
Home sales are strong, interest rates are low, refinance activity is booming, and the future of the housing market is looking bright. Two weeks ago, the Mortgage Bankers Association (MBA) released its revised predictions for the remainder of this year as well as estimates for the year to come. By the end of 2020, the MBA predicts that total mortgage originations will reach their highest level in 17 years. In 2021, they expect to see this trend continue, with record-high purchase origination volume, an expanding GDP, and an upward trend in mortgage rates.
In October, the MBA predicted that the third and fourth quarters of this year would bring total mortgage originations to $3.18 trillion in 2020. However, after home sales strengthened and the Federal Reserve voted to leave the benchmark interest rate near zero, the MBA adjusted their prediction to $3.39 trillion by the end of the year. If this estimate rings true, it will mean a 50% increase from the total originations in 2019 and the highest level since 2003.
Refinances are expected to be the driver of the increase in total originations. By the end of the year, the MBA predicts that refinance originations will reach a volume of $1.97 trillion – an astounding 91.5% increase from 2019. Purchase originations are expected to reach $1.42 trillion – a 16% increase from last year.
In 2021, the MBA forecasts a record-breaking high in purchase originations, a decline in refinances, and an overall decrease in total originations. If new purchase originations reach their predicted volume of $1.59 trillion, this would be the highest level ever recorded. The previous record was set in 2005, when purchase originations reached $1.5 trillion. After a coronavirus vaccine is released and the nation begins to recover, the MBA expects that the GDP will expand by an annual rate of 3%. Furthermore, the unemployment rate should continue to improve, with an expected drop from 6.9% to 5% by the end of 2021.
Overall, the economic outlook is showing a positive recovery from the coronavirus setback in the beginning of the year. While this is certainly good news for the country and specifically the labor market, it might cause a slight rise in mortgage rates next year. The estimated climb in rates is less than a 0.5% increase which will keep rates in a historically low range. Plus, the recovering economy should help lower the median price of existing home sales to $294,900.
“The housing market has seen a meaningful rebound since the onset of the pandemic,” said Mike Fratantoni, MBA chief economist. With available housing inventory continuing to increase and home sales staying strong, the market is expected remain a bright spot of the economy next year. Though mortgage rates are historically low, the marginal rise could still impact your savings on interest. To take advantage of today’s low rates, talk to us about getting started on your application. Whether you’re looking to refinance, renovate, or purchase, we know you’ll find the perfect fit with one of our many mortgage options.
Sources: Bureau of Labor Statistics, HousingWire, Mortgage News Daily