According to the Mortgage Bankers Association, US buyers spent about $ 1.61 trillion on home purchases in 2021, which is an increase of about 9% from 2020. In 2022, experts expect lending to be even higher due to stiff competition, high prices and low mortgage rates.
The $ 1.61 trillion in bank loans for home purchases last year surpassed the $ 1.51 trillion loaned out during the housing bubble in 2005, which was the highest number on record since 1990 The number of loans to homebuyers actually declined from 4.92 million in 2020 to 4.74 million in 2021, but the amount of these loans increased in 2021, the MBA said.
This was often because buyers paid more than the prices the homes were asking to beat other bids in a market where demand exceeded supply.
“Strong demand for housing, a persistent increase in demand for housing, limited supply, rising prices – this is what led to this record level of purchase last year,” said Mike Fratantoni, Chief Economist of the MBA.
In October, median home prices in the United States were almost 20% higher than the previous year, according to the most recent S&P CoreLogic Case-Shiller Home Price Index. The increase was part of the widespread impacts of the COVID-19 pandemic, which has led many Americans to begin to desire more spacious homes as they switch to remote work.
Steady job growth, a stock market at record highs, rising rents and expectations for higher mortgage rates have also boosted homebuyers, although soaring prices and a historically low level of homes on the market. selling have excluded many others.
The housing market is expected to continue to sizzle this year, which is why the MBA predicts the dollar value of home purchase loans to hit a new high of $ 1.74 trillion.
While inventory for sale may end up being a bit better than in 2021 as home builders build more homes, that still won’t be enough to give buyers the upper hand, Fratantoni said.
“2022 is always going to be a sellers market,” he said. “There is more demand than supply, which is why we are very confident that prices will continue to rise.”
Meanwhile, home buyers will likely have less purchasing power this year to deal with rising home prices.
The extraordinarily low mortgage rates that have helped boost demand in the housing market are expected to continue to rise in 2022 as the Federal Reserve gradually cuts monthly bond purchases it has made since the early days of the pandemic. The central bank has already signaled that it plans to start raising interest rates as early as this spring to curb the sharp rise in inflation.
The average 30-year fixed-rate benchmark mortgage rate remained around 3% in 2021. MBA forecasts predict that this average rate will rise to 4% this year.
This is close to the forecasts of other housing economists. The National Association of Realtors predicts that the average rate will rise to 3.7% by the end of this year. Greg McBride, chief financial analyst at Bankrate, predicts rates will peak at 4% but end the year at 3.5%.
“It’s going to be a bit of a roller coaster ride,” McBride said. “The higher rates we expect in 2022 will not take the real estate market’s breath away, but it will significantly change the refinancing equation.”
Homeowners borrowed some $ 2.32 trillion in 2021 to refinance their mortgage, down about 12% from 2020, when refinancing hit an all-time high, according to the MBA. In total, mortgage refinancing in 2021 and 2020 amounted to nearly $ 5,000 billion.
The MBA projects mortgage refinancing to fall to $ 870 billion this year, the lowest since 2018 at $ 467 billion.
The Associated Press contributed to this report.