The Mortgage Bankers Association on Tuesday released revised estimates for the third and fourth quarter of 2020 as well as predicting record purchase volume for 2021. Although The MBA expects decreased numbers of refinancings will lower overall origination next year to around $2.56 trillion, that would still be the second-highest number in the last fifteen years.
The rebounding economy is also likely to mean higher mortgage rates, with the MBA forecasting 2.9% by the end of 2020, rising to 3.3% by Q4 2021.
MBA is forecasting a rise in purchase originations to $1.59 trillion – more than the previous all-time high of $1.51 trillion in 2005 — but sees refinances decreasing to $971 billion.
“The housing market has seen a meaningful rebound since the onset of the pandemic,” said Mike Fratantoni, MBA chief economist. “Record-low mortgage rates have led to a surge in borrower demand for refinances and home purchases.”
For November 2020, the MBA reports an expected $3.9 trillion in mortgage originations – the highest since 2003 and a 50% increase from 2019.
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That includes an expected 91.5% jump in refinance originations to $1.97 trillion – also the highest since 2003 – and a forecasted 16% rise in purchase originations to $1.42 trillion, the highest since 2005.
In October, MBA estimated an upward revision in total mortgage originations of only $3.175. Now, third- and fourth-quarter volumes have been revised from $860 billion to $962B, and $824 billion to $937 billion, respectively.
The median price of new homes in 3Q20 was reported at $330,600. That is expected to rise to $339,000 in 4Q20. However, existing-home price averages are expected to drop again in 4Q20, from $297,200 to $294,900. This continues the downward trend from 2Q20, when existing home price averages were at $309,200.
With record purchase volume, this points to a rebounding economy in 2021, MBA reports. They expect a growth rate of 3%, and an improving unemployment rate that reaches 5% by the end of 2021.
Other 2021 expectations from MBA include a consistent federal funds rate per quarter, estimated at .125; and an increasing 10-year treasury yield per quarter – 1.0 in 1Q21 to 1.4 in 4Q21.
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