Will the heat of the real estate market fuel record borrowing in 22? – Orange County Register

Fierce competition, low mortgage rates and soaring prices that pushed mortgage borrowing to record levels last year are expected to push lending even higher this year, experts say.

The Mortgage Bankers Association predicts that the dollar value of home purchase loans will hit a new high of $ 1.74 trillion this year, after bankers loaned about $ 1.61 trillion last year, in up about 9% from 2020, according to the Mortgage Bankers Association. Last year, it surpassed the $ 1.51 trillion loaned at the height of the housing bubble in 2005, the highest on record since 1990.

Lenders provided 4.74 million loans to home buyers last year, up from 4.92 million in 2020, according to the MBA. Despite this, the dollar value of purchase loans rose last year as home prices rose, often because homebuyers were willing to pay well above the seller’s asking price to outbid. competing offers.

“Strong demand for housing, 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.

The housing market strengthened during the pandemic as many Americans switched to working from home, which put additional living space at a premium. 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.

Median US home prices in October were nearly 20% higher than a year earlier, according to the most recent S&P CoreLogic Case-Shiller Home Price Index. 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 will always 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 from the housing market are expected to continue to rise in 2022 as the Federal Reserve phased out the 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. The 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.

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