Mortgage Borrowing Sees Record High in 2021

A row of progressively taller domino-like pieces with shadows of each piece to one side.

© PM Images - DigitalVision / Getty Images

The hot housing market fueled an all-time record for the amount Americans borrowed to buy homes in 2021.

Mortgage lenders issued $1.61 trillion in purchase loans last year, according to preliminary data from the Mortgage Bankers Association. That tops a previous record set in 2005 of $1.51 trillion.

Home prices have grown by double digits over the past year. That is driving up mortgage balances as Americans stretch their budgets to afford a home.

The average amount borrowed to finance a home purchase in November climbed to $414,115, the MBA recently reported.

The Commerce Department reported that median sales prices for new homes rose nearly 19% in November, while the National Association of REALTORS® reported existing-home prices jumped by a median of 13.9% annually last month.

“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 Wall Street Journal.

The surge in home prices lately is outpacing the mix of rising incomes and low interest rates, economists say. Mortgages are less affordable relative to income than at any point since 2008, according to the Federal Reserve Bank of Atlanta, as reported by The Wall Street Journal. In the first part of 2021, a mortgage payment on a median-priced home comprised about 29% of a person’s income. By October, that percentage jumped to 33%.

As home prices rise, buyers aren’t just borrowing more but are bringing larger down payments to close as well. The national median down payment recently hit its highest level since at least 2005, ATTOM Data Solutions reports. The median down payment on a single-family home purchased with financing in the third quarter was $27,500, up 41% from $19,502 in the third quarter of 2020.