Increased housing demand and higher prices led to last year's...

Increased housing demand and higher prices led to last year's record; above, the line to view an open house in Huntington Station in September. Credit: Raychel Brightman

The fierce competition, low mortgage rates and soaring prices that helped raise mortgage borrowing to record heights last year is expected to drive lending even higher this year, experts say.

Banks lent an estimated $1.61 trillion for home purchases last year, up about 9% from 2020, according to the Mortgage Bankers Association. That tops the $1.51 trillion lent at the peak of the housing bubble in 2005, the highest on records going back to 1990.

Lenders issued 4.74 million loans to borrowers buying a home last year, down from 4.92 million in 2020, according to the MBA. Even so, the dollar value of for-purchase loans increased last year as home prices surged, often as homebuyers agreed to pay well above a seller’s asking price to outbid competing offers.

"Strong housing demand, persistent increase in housing demand, constrained supply, increase in prices — that’s what led to that record purchase level last year," said Mike Fratantoni, the MBA’s chief economist.

The housing market has strengthened during the pandemic as many Americans transitioned to working at home, which put additional living space at a premium. Steady job growth, a stock market at all-time highs, rising rents and expectations of higher mortgage rates have also spurred homebuyers, even as skyrocketing prices and a historically low level of homes for sale have shut out many others.

Nationally, median home prices in October were nearly 20% higher than a year earlier, according to the most recent S&P CoreLogic Case-Shiller home price index.

The housing market is expected to continue to sizzle this year, which is why the MBA projects that the dollar value of for-purchase home loans will climb to a new high of $1.74 trillion.

While the for-sale inventory may end up being a little better than in 2021 as home builders crank out more homes, it still won’t be enough to give the upper hand to buyers, Fratantoni said.

"2022 is still going to be a seller’s market," he said. "There’s more demand than supply, and that’s why we’re very confident that prices are going to keep going up."

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