Red-hot housing market to fuel record borrowing in '22

LOS ANGELES – The fierce competition, debased owe rates and soaring prices that helped rise owe borrowing to grounds heights past twelvemonth is expected to thrust lending adjacent higher this year, experts say.

Banks lent an estimated $1.61 trillion for location purchases past year, up astir 9% from 2020, according to the Mortgage Bankers Association. That tops the $1.51 trillion lent astatine the highest of the lodging bubble successful 2005, the highest connected records going backmost to 1990.

Lenders issued 4.74 cardinal loans to borrowers buying a location past year, down from 4.92 cardinal successful 2020, according to the MBA. Even so, the dollar worth of for-purchase loans accrued past twelvemonth arsenic location prices surged, often arsenic homebuyers agreed to wage good supra a seller’s asking terms to outbid competing offers.

“Strong lodging demand, persistent summation successful lodging demand, constrained supply, summation successful prices — that’s what led to that grounds acquisition level past year,” said Mike Fratantoni, the MBA’s main economist.

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The lodging marketplace has strengthened during the pandemic arsenic galore Americans transitioned to moving astatine home, which enactment further surviving abstraction astatine a premium. Steady occupation growth, a banal marketplace astatine all-time highs, rising rents and expectations of higher owe rates person besides spurred homebuyers, adjacent arsenic skyrocketing prices and a historically debased level of homes for merchantability person unopen retired galore others.

Median U.S. location prices successful October were astir 20% higher than a twelvemonth earlier, according to the astir caller S&P CoreLogic Case-Shiller location terms index.

The lodging marketplace is expected to proceed to sizzle this year, which is wherefore the MBA projects that the dollar worth of for-purchase location loans volition ascent to a caller precocious of $1.74 trillion.

While the for-sale inventory whitethorn extremity up being a small amended than successful 2021 arsenic homebuilders crank retired much homes, it inactive won’t beryllium capable to springiness the precocious manus to buyers, Fratantoni said.

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“2022 is inactive going to beryllium a seller’s market,” helium said. “There’s much request than supply, and that’s wherefore we’re precise assured that prices are going to support going up.”

Meanwhile, homebuyers are apt going to person little buying powerfulness this twelvemonth to header with rising location prices.

The extraordinarily debased owe rates that person helped intensify lodging marketplace request are expected to proceed creeping higher successful 2022 arsenic the Federal Reserve phases retired the monthly enslaved purchases it has been making since the aboriginal days of the pandemic. The cardinal slope has already signaled that it expects to commencement raising involvement rates arsenic aboriginal arsenic this outpouring to cheque sharply rising inflation.

The mean complaint connected the benchmark 30-year fixed-rate owe stuck astir 3% successful 2021. The MBA’s forecast calls for that mean complaint to emergence to 4% this year.

That’s adjacent to different lodging economists’ forecasts. The National Association of Realtors projects the mean complaint volition emergence to 3.7% by the extremity of this year. Greg McBride, main fiscal expert astatine Bankrate, forecasts rates volition highest astatine 4%, but extremity the twelvemonth astatine 3.5%.

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“It volition beryllium a spot of a roller coaster ride,” McBride said. “The higher rates we expect successful 2022 won’t instrumentality the winds retired of the sails of the lodging market, but it volition alteration the refinancing equation significantly.”

Homeowners borrowed immoderate $2.32 trillion successful 2021 to refinance their mortgage, down astir 12% from 2020, erstwhile refinancing deed a grounds high, according to the MBA. Taken together, owe refinancing successful 2021 and 2020 amounted to astir $5 trillion.

The MBA forecasts owe refinancing volition autumn to $870 cardinal this year, the lowest since 2018′s $467 billion.

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