The Year Ahead 2021

I don’t believe there will be any shortage of people happy to see 2020 from a rearview mirror. Despite getting through a year of lingering uncertainty, I see 2021 as a year full of promise for us as a company and a country. Regardless of the hurdles encountered, we broke all company records by funding loans to the tune of $2.15 billion at the close of Q4 2020 — a 94% increase year over year. This compares to an expected 58% increase for the industry, creating significant market share for Hamilton Home Loans.

Last year, we didn’t just weather the storm; we were resilient and we grew while others may not have been as fortunate. If trends in the residential housing market continue moving toward the same trajectory in 2021, I believe we could see an even more prolific year for us as a company.

Here’s a snapshot of what I see on the 2021 horizon.

Purchases

The latest figures from the National Association of Realtors indicate housing sales were up 26.6% year over year with the median price for a home sitting at $313,000. The robust sales figures we saw in 2020, were in part buoyed by the federal monetary policy, which has kept the federal funds rate at or near zero and the average 30-year and 15-year fixed mortgage rates near 2.96% and 2.4% respectively.

We should expect strong demand for mortgage originations with numbers projected to come in around $2.75 trillion for 2021, a 10% increase in purchase transactions year over year, according to the MBA. In particular, the second half of 2021 should continue to be robust for purchase growth as interest rates are expected to be flat or inch up a few tenths of a percent. However, inventory shortfall may be more pronounced than 2020.

Refinance

According to the MBA, refinance activity is expected to drop to about $946 billion in 2021 as many homeowners have already gone through the process. However, there are still about 20 million Americans holding loans higher than 4% and we’ll have to see what pans out as far as refinance activity from them, especially if mortgages rates tick up a few tenths of a percent higher.

It’s possible that when we get a handle on the COVID crisis and the economy improves, we may see an uptick in cash-out refinancing during the second half of the year.

New Builds

Through a shaky 2020, the housing market has been a bright spot in the economy. Single-family construction made notable gains, increasing 10.1% in 2020, according to the NAHB.

The pace of single-family starts in November 2020 was the highest production rate since the spring of 2007. At this time, there are now 589,000 single-family homes under construction — up 12.8% higher than last year.

It’s expected that much of the demand for new construction in 2021 will be driven by pent up demand from first-time homebuyers, especially millennials, and those seeking more space to work remotely due to changing business realities, with the greatest areas of demand likely happening in small- and medium-sized cities as well as rural areas.  

Business Trends

As many of you may be aware, the servicing side of the business has continued to grow. That increase in volume has caused us to pivot and make changes in our approach toward loan servicing, including improving customer communications and having our subservicer provide more detailed reporting on the status of customer accounts.

Hamilton, along with many other businesses, will likely re-evaluate whether to remain a remote workforce, go back to a brick-and-mortar structure or some sort of hybrid business model depending on how quickly the COVID crisis can be bottled up.

Last Words

I expect 2021 to be a strong year for the mortgage industry, fueled by low rates, an increase in homebuilding, sizable demand from millennials, and the trend of more buyers seeking homes away from large population centers. 

Later in the year, there should be sufficient confidence to fuel job growth, permit incomes to rise and home sales to meaningfully increase as more Americans take advantage of record-low interest rates.

Pat Sheehy
President and CEO

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