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Housing Market Fuels More Borrowing | News, Sports, Jobs


LOS ANGELES — Fierce competition, low mortgage rates and soaring prices that helped push mortgage borrowing to record highs last year are expected to drive lending even higher this year, experts say.

Banks lent about $1.61 trillion for home purchases last year, up about 9% from 2020, according to the Mortgage Bankers Association. That exceeds the $1.51 trillion lent at the height of the housing bubble in 2005, the highest since 1990.

Lenders issued 4.74 million loans to borrowers buying a home 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 soared, often when buyers agreed to pay well above the seller’s asking price to outbid offers. competitors.

“Strong housing demand, a persistent increase in housing demand, limited supply, rising prices – that’s what led to this record level of buying last year”, said Mike Fratantoni, MBA’s chief economist.

The housing market has strengthened during the pandemic as many Americans shifted to working from home, which put extra living space at a premium. Steady job growth, a stock market at all-time highs, rising rents and expectations of higher mortgage rates have also boosted homebuyers, even as soaring prices and a historically low level of homes in sell have excluded many others.

Median U.S. home prices in October were nearly 20% higher than a year earlier, according to the latest S&P CoreLogic Case-Shiller Home Price Index.

The housing market is expected to continue to sizzle this year, which is why the MBA predicts the dollar value of home purchase loans will hit a new high of $1.74 trillion.

While inventory for sale may end up being a bit better than 2021 as homebuilders create more homes, that still won’t be enough to give buyers the upper hand, Fratantoni said.

“2022 will always be a seller’s market” he said. “There is more demand than supply, and that is why we are confident that prices will continue to rise.”

Meanwhile, homebuyers will likely have less buying power this year to deal with rising home prices.

The extraordinarily low mortgage rates that have helped fuel demand in the housing market are expected to continue to climb in 2022 as the Federal Reserve gradually phased out the monthly bond purchases it has been making 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 control the sharp rise in inflation.

The average rate on the benchmark 30-year fixed-rate mortgage has remained around 3% in 2021. The MBA forecast predicts 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 the average rate will rise to 3.7% by the end of this year. Greg McBride, chief financial analyst at Bankrate, expects rates to peak at 4%, but end the year at 3.5%.

“It will be a bit of a roller coaster” McBride said. “The rate hike we expect in 2022 will not cut the veils on the housing market, but it will significantly alter 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. Taken together, mortgage refinances in 2021 and 2020 amounted to nearly $5 trillion.

The MBA predicts mortgage refinancing will fall to $870 billion this year, the lowest since 2018’s $467 billion.

Copyright 2022 The Associated Press.

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