Housing analysts and economists predict that mortgage borrowing and home equity lines of credit will reach record levels in 2022. Fierce competition, price wars, low interest rates and soaring home prices will all play a role in driving lending levels to levels that have never been seen before now. This continues a trend that began in earnest a few years ago.

Home Lending Patterns

In 2 021, banks loaned about $1.61 trillion for home purchases. This is about 9% more than the amount they loaned in 2020. The Mortgage Bankers Association states that at the peak of the housing bubble in 2005, $1.51 trillion in mortgage loans were provided to home buyers. Their records date back to 1990.

Number of Mortgage Loans

In 2021, 4.74 million loans were issued to home buyers. This is down from 4.92 million mortgage loans processed in 2020. However, last year's loans were for higher amounts of money. The dollar value of each mortgage loan corresponds with the increase in home prices. Many home buyers made bids that were well above listed prices, and banks required appraisals in order to ensure that the loans would not contribute to a bubble, which is what caused the Great Recession of 2007-08.

Housing Demand Is on the Rise

According to the chief economist at the Mortgage Bankers Association, there is a strong demand for single-family homes, and the demand for such homes continues to increase. The supply is still constrained. The pace of new home building is much lower than the demand for new single-family homes. In the existing home market, fewer sellers are listing their homes compared to years ago. This means that it's still a seller's market, and analysts don't predict any changes in this situation for 2022.

Pandemic Impacts on Housing Demand

The COVID-19 pandemic played a big role in the demand for single-family homes. When many Americans transitioned to working from home in the spring of 2020, they needed additional living space. Children sent home from school to do remote learning also needed space. Apartments don't offer enough space for a home office, temporary classroom and regular living.

Job Growth Encourages Home Buyers

People are more likely to buy a home when they feel confident in their ability to stay employed. Steady job growth has inspired home buyers to go ahead with a purchase and take out a mortgage loan. A good stock market has also fueled the purchase of high-end homes, vacation houses and luxury homes.

Home Prices Aren't Stopping Demand

The median price of a home in the United States was 20% higher in October 2021 than in October 2020. Analysts predict that prices will continue to go up, but they don't think it will be a 20% increase overall. The Mortgage Bankers Association expects that the dollar value of mortgage loans issued in 2022 will be around $1.74 trillion, which is about a 10% increase over 2021's dollar amount.

Inventory Expected to Increase

The Mortgage Bankers Association predicts that the inventory of existing homes for sale will improve in 2022. Baby Boomers and retirees may decide that it's finally time to downsize. Gen X parents whose college-age children moved home during the pandemic may also be able to downsize as the economy continues to improve and their kids find jobs to pay their own rent. However, the inventory increase still won't be enough to turn the market into a buyer's market over a seller's market.

Interest Rates Likely to Rise

The federal reserve has indicated that an increase in interest rates is likely for 2022. This would decrease the purchasing power of home buyers. They may not be able to afford as much house if they have to make higher payments because of higher interest rates. The higher interest rates are likely in order to keep inflation in check. In 2021, the average rate on a typical 30-year fixed-rate mortgage was 3%. Experts expect that to go up to about 3.7% for 2022. Interest rates could go up to 4% by the middle of the year, and analysts predict that the average rate will be 3.5% for 2022 as a whole.

Refinancing

In 2021, homeowners spent $2.32 trillion on home refinancing. This was a 12% drop from 2020. The Mortgage Bankers Association predicts that borrowing for refinancing will drop to $870 billion for 2022.