Purchase Originations on Pace for Record $1.67 Trillion, MBA Reports
April 27, 2021
Purchase originations are on track to grow 16.4% to a new record of $1.67 trillion in 2021, the Mortgage Bankers Association reported.
"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 homebuying years, and still low mortgage rates," said Mike Fratantoni, 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."
After last year's 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 continue rising to around 3.7%, contributing to a further slowdown in refinance demand. Refinance originations are expected to fall 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."
According to Fratantoni, the American Rescue Plan and vaccine rollout will continue to provide a lift to the economy, households, and businesses through the summer. He expects economic growth to jump to 6.5% this year, a vast improvement from the pandemic-induced contraction of 2.4% in 2020.
"The economy will continue to recover, with rapid job growth, particularly in the hardest-hit, service sectors of the economy," Fratantoni said. "The job growth is certainly positive, but this environment sets the stage 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."
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