CoreLogic released its final three-year housing and mortgage outlook report for the year on Thursday, and if numbers hold up, the data company predicts 2021 will maintain its unprecedented sales and record low mortgage rates as the economy continues to recover.

CoreLogic chief economist Frank Nothaft said in a podcast on Friday that the term “unprecedented” best describes 2020. More importantly, he said the current environment may even holdup into 2023.

“We may actually see mortgage rates below 3%, perhaps for the entire year of 2021,” Nothaft said. “And I wouldn’t be surprised if this low rate environment continues even beyond 2021, not necessarily at 2.7% or 2.8% once we get out to 2022, but we are expecting mortgage rates over the next three years to be far less than they’ve been in the last decade.”

On average, CoreLogic predicts mortgage rates to sit closer to 3.2% over the next three years – nearly a percentage point lower than the average of the 2010-2019 decade.

For families with good credit, these low rates will provide ample opportunity to buy or refinance a home. However, Nothaft expects that mortgages originated today, with a contract rate of 3% or lower, are more likely to have a relatively long life and lenders will not see them coming into refinance anytime soon.


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“I do think that we are pretty much at the bottom here of the mortgage rate cycle,” Nothaft said. “So, the loans that are being originated today, and over the last few months, they’re probably going to stay on the books for a really extended period of time.”

But that doesn’t mean massive refi volume is on its way out just yet. According to Nothaft, CoreLogic data found that tens of millions of home owners have yet to take advantage of historically low rates to refinance their mortgages.

“There are a little over 20 million home mortgages outstanding, with a contract interest rate of 4% or higher still in the United States,” he said. “That’s a lot of mortgages. Especially when contract interest rates for refis are below 3%. Obviously, some of those borrowers have had financial hardship and challenges, which will make it difficult for them to come in and refinance. So, we’re not expecting 20 million loans to come in, but they’ll still be out there and many of them will be coming into refinance in 2021.”

CoreLogic also expects home prices to continue their steady incline just a bit longer, though at a more modest pace. Price appreciation is expected to average 2.5% per year during the next three years, compared with 4.8% per year during the prior decade.

Slower value growth will most likely occur from increased sales-inventory, which has been putting upwards pressure on prices for months now though recent housing starts data from the Census Bureau shows construction is finally playing catch-up. Combined with the dissipation of coronavirus and a successful vaccine, the number of new and existing homes for sale is expected to rise.

When more houses do hit the market, CoreLogic predicts millennials will generate the strongest demand over the next several years. The median age of recent first-time homebuyers is currently set at 33, but baby boomers will likely also flood the market as repeat homebuyers when the risk of COVID-19 dwindles.

IDX Real Estate