The housing market in 2021 was one for the record books. With prices at historic highs and the number of listings in a deep hole, open houses looked like Black Friday sales and many would-be buyers were elbowed out of the melee.
In 2021, the share of buyers paying all cash for home purchases trended higher in the United States, but the overwhelming majority of home sales still involved mortgages. Unfortunately, as with every year, many 2021 mortgage applications were met with denials.
The following analysis of the 7.1 million mortgage applications filed that year uncovers several markers of the unusual homebuying market: a steep rise in loan amounts, an increase in the number of mortgage denials directly tied to high-priced homes, and some changes in loan types that reflect stiff competition.
Mortgages for single-family homes averaged $343,000 in 2021. That’s a 15% increase from the 2020 average. The jump is particularly notable when you consider these mortgages rose just 8% from 2019 to 2020, a one-year increase that includes the beginning of home prices’ precipitous climb.
Demand for homes has been high for the past few years, and this competition and high prices mean that some potential buyers can’t be successful. As the size of the average mortgage balloons by 15%, for instance, people already stretching their homebuying budget can’t keep up.
Thankfully, in 2022, the number of listed homes has begun to increase in many markets. Price growth has slowed and fewer home sales are ending with a bidding war. But now buyers must contend with higher mortgage rates — a single percentage point change from 5% to 6% on a $343,000 mortgage, for instance, means $215 more each month on a house payment and a difference of roughly $77,500 in interest over the life of the loan.
