Certainly, many of us are eager to put 2020 behind us. But 2021 and beyond are still fairly uncertain, especially with regard to how and when the pandemic will begin a substantive retreat. Nevertheless, there is one thing we do know, the United States will be governed by a new administration, and there is already speculation on what its actions might be and how they could impact the mortgage industry and housing market.
General 2021 Expectations
First, let’s first review some predictions apart from what the Biden administration may or may not do.
- The MBA expects 2021 to be a very active year for homebuyers ─ purchase mortgage originations are projected to increase by 8.5 percent to a record $1.54 trillion dollars.
- This year, total originations (including refinances) will likely reach around $3.18 trillion. Next year, that number is expected to fall to $2.49 trillion, with purchase volume accounting for the bulk of that number. However, despite this decrease, the expected total volume in 2021 would still be the second-highest figure in the past 15 years.
- Home price growth is expected to slow and level off in 2021 ─ at least until a vaccine is widely administered and the pandemic has subsided.
- Interest rates are projected to hover near historic lows for the next several years, mainly because of two inescapable economic realities: 1) there isn’t enough inventory, and 2) the economy is far too fragile mid-pandemic for rates to rise.
The Biden Effect
Regarding the Biden administration and the moves it may make next year and beyond, many believe it is likely to be business as usual, especially if the Senate majority remains in Republican control. Biden’s hands will essentially be tied due to the probable makeup of Congress. Yet, it’s expected the new president will be able to influence housing policy by:
- Selecting a new leader for the CFPB and reintroducing stronger regulatory oversight. It is also generally believed a Biden administration would keep the GSEs under conservatorship, at least for the short term. However, after the pandemic is over, they could be released as regulated utilities.
- Investing $640 billion into housing over the next 10 years to provide housing that is affordable, stable, safe and healthy, accessible, energy efficient and resilient.
- Introducing a tax credit for first-time homebuyers of up to $15,000.
- Revising a number of restrictive zoning laws to bolster development, build millions of units of affordable housing, and cap certain renters’ payments.
- Extending forbearance plans fully in 2021.
Certainly, the pandemic is the #1 focus of the new administration. However, Biden will put his mark on the government’s response to it which will invariably affect the housing and mortgage market. He will also re-establish Obama-Biden era policies that were reversed by the Trump administration. As they say, the only constant is change. But just how much change we’ll actually experience with our divided government is yet to be seen.