Charge it! More money was borrowed to buy homes by Americans in 2021 than ever before.
The Wall Street Journal is reporting that mortgage lenders handed out more than $1.6 trillion in loans in 2021, beating the record of $1.51 trillion set in 2005, and topping the $1.48 trillion lent in 2020.
The paper says the boom is reflective of the flourishing housing market along with the uptick in prices during the last year, driven by low interest rates and the inclination for bigger homes. On top of that, the strong labor market and increases in pay across a number of industries — private-sector worker pay grew 4.6 percent, according to the Bureau of Labor Statistics — helped pad savings accounts, pushing potential buyers into the market.
“Buying a home is really a statement of confidence in your job situation, your financial situation, your family situation,” Mike Fratantoni, chief economist at the MBA, told the paper.
The price of homes rose 19.1 percent in the year, and the sales of existing homes were predicted to hit their highest level since 2006, according to the publication.
Younger buyers also pushed the market upwards, with millennials seeking 67 percent of first-time mortgage applications between January and August of 2021, according to the publication.
But while new buyers were hopping on the home train, refinances were slowing — down to $2.3 trillion in 2021 from $2.6 trillion in 2020.
Fixed rates for 30-year mortgages are still hovering at a very low 3 percent, and economists aren’t expecting rate increases to dissuade potential buyers. But the uptick in prices is making it difficult for some to become homeowners.
In October, it took 33 percent of income to cover a mortgage payment on a median-priced home, according to the paper, up from 29 percent earlier in the year — making it the most expensive time to take on a mortgage relative to income since 2008.
[Wall Street Journal] — Vince DiMiceli