MBA (Mortgage Bankers Associations) forecasts predict a record year for home purchase loans in 2022. Here's what that means for homebuyers.
The housing market is headed for a record-breaking year of home purchases in 2022, according to the latest forecasts from the Mortgage Bankers Association (MBA).
At its 2021 Annual Convention & Expo, the MBA presented its 2022 outlook that predicts 9% growth in purchase mortgage originations to a record $1.727 trillion.
The MBA cited robust demand from millennials, homebuyers seeking more space, and still-low mortgage rates as reasons for the expected increase in purchase activity.
The forecast sets the stage for another competitive year for homebuyers. However, Mike Fratantoni, Chief Economist and Senior Vice President for Research and Industry Technology, had good news for homebuyers who were sidelined by the run-up in prices in 2021.
“Home builders will have more success overcoming current building material shortages and should be able to increase the pace of construction to meet the sizable demand for buying,” Fratantoni said. “More newly built homes and more homeowners listing their homes for sale should lead to some deceleration in home-price growth next year. This is good news for the many would-be buyers who are currently priced out or delaying decisions because of low supply conditions and steep home-price appreciation.”
After jumping 16% in 2021, the FHFA US House Price Index is only expected to increase 5.2% in 2022. Meanwhile, single-family home starts are forecasted to increase from 1.14 million in 2021 to 1.28 million in 2022.
Along with more supply and slower price increases, the MBA is predicting the 30-year fixed mortgage rate will settle at 3.1% at the end of 2021, and 4% at the end of 2022.
Related: 2022 Mortgage Rate Forecast: Housing Authorities Weigh in
| Metric | 2020 | 2021 | 2022 |
|---|---|---|---|
| Single-family housing starts (000’s) | 1,004 | 1,137 | 1,279 |
| FHFA US House Price Index (YOY Change) | 10.9% | 16.0% | 5.2% |
| 30-Year Fixed Rate Mortgage | 2.8% | 3.1% | 4.0% |
| Purchase Mortgage Originations (Bil $) | 1,482 | 1,587 | 1,725 |
While purchase activity is expected to increase, rising interest rates are threatens to substantially diminish refinance activity. Refinance loans made up 64% of all mortgage activity in 2020 and 57% in 2021. The MBA is forecasting that share to decrease to 33% in 2022.
Overall, the 2022 MBA forecast is a mixed bag for homebuyers and bad news for those in the “wait out the market” crowd. Increased supply and slower price gains are something to look forward to. However, it comes at the cost of higher mortgage rates and buying after a year of record home appreciation.