The Housing Market Should Stay Hot This Winter

Times have certainly changed for the housing market since the onset of the pandemic this past March. Despite unfathomable job losses, pent-up homebuyer demand from the spring shifted the market into overdrive during the summer and fall. The way things look now, the winter season could be equally hot. 

Although the virus continues to lurk as a formidable threat to public health, the economy and housing markets, home sales are poised to remain stronger than usual this winter. As you may expect, part of what will drive the activity will be the continued work-from-home situations that have quickly become the norm for many people. 

Let's start with a quick 2020 recap. The Mortgage Bankers Association (MBA) expects that when 2020 is all said and done, purchase mortgage originations for the year will end up at approximately $1.34 trillion, which would be 5 percent higher than 2019 and a level not seen since the $1.4 trillion volume of 2006. Meanwhile refinance activity is expected to hit $1.65 trillion, the strongest refi year since 2003's $2.65 trillion.

Put those two figures together and it means that the MBA expects $2.99 trillion in total originations (purchase and refinances) for 2020 — the most since 2005's $3.02 trillion.

Even more eye-opening than this year’s impressive purchase and refinance origination forecasts is the fact that these numbers could be higher. The abrupt weakening of the economy and job market, along with millions of homeowners going into forbearance plans, has pulled down MBA’s Mortgage Credit Availability Index to its lowest mark since 2014. Lenders continue to navigate the increased risk and uncertainty in the economy, along with the costs of helping millions of families with forbearance. 

Heading into the winter months, "We are currently seeing buyers sticking around in the housing market much later than usual. If that trend continues, we will see more buyers in the market this winter, too," said Danielle Hale, chief economist for Realtor.com.

Additional factors that point to the likelihood of a hot housing market over this winter include:

• Low rates expected to continue into 2021
• Slow but steady jobs recovery
• Possible continued migration from city centers to houses in the suburbs or rural areas

Of course, we all should keep in mind that not everything in the housing world is good news right now. Homeowners and renters affected by the pandemic through furloughs, unemployment or underemployment are feeling the pain. The jump of nearly four percentage points in the mortgage delinquency rate during second-quarter 2020 was the largest quarterly rise since the launch of MBA’s National Delinquency Survey in 1979. And according to a November Housing Wire report, there are 3 million mortgages currently in forbearance, a remarkably high number. 

Ultimately, the economic crisis will be with us until the public health crisis is solved. A sense of normalcy and a more robust economic recovery greatly depend on slowing the spread of the virus, hopefully through the promising vaccines that appear to be on the cusp of regulatory approval.