With the housing market’s strength enduring in the face of the COVID-19 pandemic, the Mortgage Bankers Association (MBA) on Tuesday made upward revisions to its projected originations for both 2020 and 2021.
Most notably, the MBA has bumped up its purchase originations forecast for 2021. In light of the robust sales pace and historically low rates leading to a wave of buyer demand, the MBA now expects $1.59 trillion in purchase originations next year. If realized, that would be a record high, surpassing the previous peak of $1.51 trillion set in 2005.
This week’s report marks the third straight month of upward revisions for the MBA’s 2021 purchase forecast, signaling the organization’s continued positive outlook for homebuying since the market’s rebound from COVID-related woes in the spring.
Refinance originations, on the other hand, are expected to backtrack after the prolonged refi boom this year. The MBA’s forecast calls for a decline in refi originations to $971 billion in 2021. The refi decrease partially accounts for the MBA’s forecast of total originations falling to $2.56 trillion next year, although that projection would still represent the second-highest total of the last 15 years.
As for this year, total originations are forecast at $3.39 trillion, up from the $3.18 trillion the MBA predicted last month. If realized, that would mark a 50% jump from 2019’s $2.25 trillion volume, and would be the highest total figure since the $3.81 trillion originated in 2003. The ongoing refi surge is expected to result in a 91.5% jump from last year, bringing refinance originations to $1.97 trillion, also highest since 2003. Purchase originations are estimated to close 2020 at $1.42 trillion, most since 2005 and up 16% year over year.
Meanwhile, the MBA expects the economy at large to continue finding its footing in the months ahead, forecasting a 3.0% uptick in real GDP in 2021 after a projected drop of 2.5% this year. The unemployment rate is also predicted to progress at a faster rate next year, with the MBA expecting it to fall to 5.5% by the end of 2021.
Finally, the recovering economy is likely to bring rising mortgage rates, though the expectation remains that they’ll stay low for the foreseeable future. The MBA anticipates 2020 to close with rates at 2.9%, growing to 3.3% by the fourth quarter of next year.