Originations are on track to grow by 16.4% to a record $1.67 trillion.

The Mortgage Bankers Association’s updated Economic Forecast projects 2021 purchase originations are on track to grow by 16.4% to a record $1.67 trillion. “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 interest 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 residential originations, MBA forecasts volume to fall 14% in 2021 to $3.28 trillion—which would still mark the third-highest total ever. MBA expects rates to continue rising to 3.7%, contributing to a further slowdown in refinance demand. Refinance originations are expected to fall by 33% to $1.62 trillion. Fratantoni said the American Rescue Plan and vaccine rollout should continue to provide a lift to the economy, households and businesses through the summer. He said he expects economic growth to jump to 6.5% this year, a vast improvement from the pandemic-induced contraction of 2.4% in 2020. “If housing inventory levels improve and help to keep affordability in check, home sales should remain strong into 2022. The key word this year is transition,” Fratantoni added. “We are moving from a year in which the pandemic dominated everything to a period of economic recovery.”

Source: MBA