Purchase volume will increase 9% to reach $1.73 trillion in 2022, due in part to home builders bringing more inventory online, while refinance volume will plummet 62% to $860 billion due to rising mortgage rates, the Mortgage Bankers Association (MBA) forecasts.
As a result, total origination volume will reach $2.59 trillion in 2022 – a 33% decline from this year.
The anticipated 9% increase in purchase volume would help offset a 14% decrease in purchase volume in 2021.
“2022 should be another strong year for the housing market,” says Mike Fratantoni, chief economist and senior vice president for research and industry technology for the MBA, in a statement. “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. 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.”
The MBA’s 2022 outlook was presented at its 2021 Annual Convention & Expo.
The forecast assumes continued, strong economic growth amidst eventual easing of the supply chain constraints that have curbed some economic activity this year.
“The economy and labor market rebounded in 2021, but overall growth fell short of expectations because of stubborn supply chain issues that fueled faster inflation, slowed consumer spending, and presented challenges in filling the record number of job openings available,” Fratantoni says. “With inflation elevated and the unemployment rate dropping fast, the Federal Reserve will begin to taper its asset purchases by the end of this year and will raise short-term rates by the end of 2022.”
The MBA expects mortgage rates to rise in 2022, with the average rate for a 30-year, fixed-rate mortgage expected to end 2021 at 3.1% before increasing to 4.0% by the end of 2022.
“Mortgage lenders and borrowers should expect rising mortgage rates over the next year, as stronger economic growth pushes Treasury yields higher,” Fratantoni says.
Robust homebuyer demand from millennial households, households seeking more space, and still-low mortgage rates are favorable tailwinds for the housing market in 2022 and are behind MBA’s expectations of record purchase originations over the next two years.
Photo: Todd Kent