Last year’s mortgage market was dominated by refinances, with refis hitting the highest level in 17 years. This year is looking like it’s going to be an entirely different story. A purchase story, that is.
According to a new forecast from the Mortgage Bankers Association, purchase mortgage originations are currently expected to hit an all-time high in 2021.
The MBA’s latest forecast shows that purchase originations are projected to rise by 16.4% in 2021 to $1.67 trillion, which would be a new record.
Last year saw a record in total originations, $3.83 trillion, which was driven primarily by refinances. However, interest rates are expected to rise somewhat this year, leading to a decline in refis.
According to the MBA, refi originations are expected to fall 33% to $1.62 trillion.
If that happens, purchase originations will exceed refi originations in 2021.
Overall, the MBA expects mortgage origination volume to fall by 14% this year to $3.28 trillion. But the news isn’t all that bad, as that volume would still be the third-highest total on record.
"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.
According to Fratantoni, the lack of housing supply is the “biggest hurdle” to home sales hitting even larger numbers.
“The widening imbalance of supply and demand is driving up home-price growth and eroding affordability - especially for entry-level buyers,” Fratantoni said.
"Refinance volume has already trailed off because of the steep climb in mortgage rates since January," Fratantoni added. "Mortgage lenders should continue to prepare for the transition to a strong purchase market and slowing refinance activity."