Mortgage purchase volume is forecasted to set a new record next year, signaling that the demand for home buying is set to continue at a torrid pace in 2021. A new forecast revealed Wednesday by the Mortgage Bankers Association (MBA) predicts purchase origination volume to grow 8.5 percent year over year to a new record of $1.54 trillion in 2021.
The forecast assumes that there will be a COVID-19 vaccine that brings the pandemic under control, which subsequently leads to a gradual economic recovery, aided by fiscal stimulus.
“The economy, labor market, and housing market have all seen meaningful rebounds since the onset of the pandemic, but there is still profound uncertainty,” Mike Fratantoni, the chief economist and senior vice president for research and industry technology, said in a statement.
“Additional waves of the virus could lead to further lockdowns and more job market instability.” Fratantoni added. “On the other hand, another pandemic- related stimulus package would result in faster economic growth and additional support for the housing market, albeit with slightly more upward pressure on mortgage rates.”
Record low mortgage rates have led to sustained demand in 2020. MBA forecasts that total originations — including both purchase and refinance originations — will hit $3.18 trillion in 2020, the highest level since 2003. A drop in refinance originations has MBA forecasting $2.49 trillion in total originations in 2021, still, the second-highest amount in the past 15 years.
MBA forecasts that the 2020 will close with mortgage rates still at record lows of 3 percent, before gradually increasing in 2021 to a rate of 3.3 percent for a 30-year fixed-rate mortgage. The Federal Reserve, however, is expected to keep short-term interest rates at zero through at least 2020.
Even with the uncertainty that plagues the economy, Fratantoni believes 2021 will be a strong year for the mortgage market, due to rates remaining near historic lows, an increase in homebuilding, strong demand from millennials and a desire of more households seeking larger homes.
As long as the spread of the pandemic is brought under control, the economy should expand around 3 percent next year, allowing the job market to improve, incomes to rise, and home sales to meaningfully increase,” Fratantoni said.
