As mortgage rates hit record lows, Colorado home loans closed in 2020 surpassed $100 billion by a huge margin and more than doubled from 2018, according to public Home Mortgage Disclosure Act data released in June.
Loans originated and closed for Colorado homes hit $159 billion in 2020, compared to a little less than $100 billion in 2019 and $68 billion the year before.
The Denver metro area, where the residential housing market saw rising home prices and frenzied demand in a seller’s market that only recently has shown signs of slowing, experienced a similar trend to the state. Denver’s 257,000 loans closed in 2020 amounted to $91 billion, 61% more than 2019.
Citing concerns over the Covid-19 delta variant, a Zillow analysis last week noted mortgage rates reached their lowest level in half a year.
“But recent market movements reinforce the months’ long notion that pandemic-related factors will continue to dictate the path forward for the market, and a sharp upward move in mortgage rates appears unlikely until we get a better handle on COVID,” Zillow economist Matthew Speakman wrote in an Aug. 4 analysis.
The average closed mortgage amount in the metro is rising as well. The average residential mortgage closed, including conventional and governmental loans, increased to $353,000 in 2020 compared to $310,000 in 2018.
Around 21% of Denver-area renters could afford a typical monthly mortgage payment, according to a report Zillow released earlier this year. Assuming a 3.5% down payment, a mortgage rate of 3%, a mortgage insurance premium of 0.7% and local estimates of insurance payments and taxes, the study found that 27.4% of renter households nationwide could afford a monthly mortgage.
The typical monthly mortgage payment in the Denver area is $2,376, which is about half the median monthly income among renter households, according to Zillow data.
There are signs that mortgage originations will slow down over the next couple of years. Freddie Mac in July said it forecasts around $3.9 trillion in loan originations in 2021 after 2020 saw $4.3 trillion in mortgage loans, the largest yearly volume since 2005.
“We expect refinance activity to soften as higher mortgage rates dampen activity, with refinance originations declining from $2.2 trillion in 2021 to $713 billion in 2022,” Freddie Mac wrote in its third-quarter economic and housing forecast in July. “Overall, we forecast that total originations will decline from $3.9 trillion in 2021 to $2.6 trillion in 2022.”
Read more on Denver Business Journal.
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