The Mortgage Bankers Association (MBA) is predicting a
banner year for purchase mortgage originations.
The Association’s chief
economist and senior vice president Mike Fratantoni told attendees at MBA’s Spring
Conference and Expo that those originations are on track to grow 16.4 percent
this year, setting a probable new record at $1.67 trillion. Refinancing will,
however, drag overall origination volume down from last year’s record $3.83
trillion to $3.28 trillion, a 14 percent decline. That would still be the third
highest volume ever.

“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,” Fratantoni said. ¬†“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.”

Mortgage rates are expected to continue rising to around 3.7
percent, contributing to a further slowdown in refinance demand. Refinance
originations are expected to fall by 33 percent to $1.62 trillion.

“Refinance volume has already trailed off because of the
steep climb in mortgage rates since January,” said Fratantoni. “Mortgage
lenders should continue to prepare for the transition to a strong purchase
market
and slowing refinance activity.”

The economist predicted that the recent enactment of the American
Rescue Plan and the ongoing vaccine rollout will provide a boost to the economy,
households, and businesses throughout the summer. He expects the GDP to grow
6.5 percent this year after contracting by 2.4 percent during the pandemic in
2020.

“The economy will continue to recover, with rapid job
growth, particularly in the hardest-hit, service sectors of the economy,” said
Fratantoni. “The job growth is certainly positive, but this environment sets
the stage for higher mortgage rates and faster inflation. However, if
housing inventory levels improve and help to keep affordability in check, home
sales should remain strong into 2022
.”

By Jann Swanson , dated 2021-04-23 10:33:58

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Courtesy of Mortgage News Daily

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