I think it’s safe to say that 2019 has been a historical year when speaking about the mortgage and real estate markets. Several Georgia markets saw record-low interest rates on new and refinanced mortgage loans, and real estate agents managed many competing home offers, driving prices above asking in many cases. The Mortgage Bankers Association says that the mortgage industry is on a path for the best year since the great recession in 2008 as a result of the rate cuts enacted by the Federal Reserve. What’s in store for 2020? Many are wondering if we will see interest rates continue to stay where they are now, or if they will drop even lower. Let’s look back at 2019 and see where we could be headed in 2020 based on what the experts are predicting.
Mortgage experts across the country predicted that 2019 would see rates increase as the demand of mortgage originations soared, but that is exactly the opposite of what happened. Demand rose and interest rates fell. This benefited everyone in the industry, not only the mortgage lenders and realtors, but the homebuyers, sellers, and current homeowners. Homebuyers were able to obtain financing more easily, sellers’ homes sold faster, and homeowners were able to take advantage of lower interest rates by refinancing their current mortgage.
The focus of many mortgage professionals was on first-time homebuyers in 2019, according to experts at NerdWallet. During the great recession, many millennials delayed buying a home due to affordability, tight lending restrictions, and student debt. If the homebuyer was not able to meet the down payment requirement, the lenders, in turn, charged higher interest rates due to the default risk. Depending on the mortgage product, homebuyers would also have to purchase private mortgage insurance making the payments higher. The changes in the market this year have captured the attention of millennials who are looking to sew some roots as they desire to raise families in homes of their own.
If you think you missed your chance to score low interest rates in 2019, you may still be able to lock in a great rate in 2020, says many mortgage experts who talked to The Mortgage Reports.
As we write this post in late December 2019 average rates are sitting around 3.5%, according to Freddie Mac. These current rates are around 1% lower than a year ago. Freddie Mac and the Mortgage Bankers Association back up talk that rates will stay low throughout 2020. These current rates will prompt an increase in refinances as well, as homeowners look to lower their monthly expenses.
What happens when demand is high, and supply is low? Prices go up! That goes back to the basic economics of supply and demand. CoreLogic, a property data firm, says that home prices could jump over 5% in 2020, which is higher than the expected average salary increase. 2019 saw housing prices increase only 3.5%. The expected price increase will make it particularly difficult for first-time homebuyers looking for a starter home in the lower price ranges, as low interest rates and low supply of starter homes push up prices. There seems to be no end to this trend in sight beyond 2020. According to Arch MI, a mortgage insurance company, there may be a low home price decline over the next two years, but no major metro markets are expected to see prices decline during this time.
Millennials made up almost 50% of all mortgage transactions in September of 2019, according to realtor.com. This comes as no surprise. As millennials begin aging into their late twenties and early thirties, get settled into their careers, and consider starting families, the time to purchase a home is now rather than later for the majority.
However, as more and more baby boomers choose to age in their homes, this means less inventory on the market for the millennials to scoop up. A Freddie Mac study shows that there would have been over 1 million more homes on the market last year if today’s boomers behaved like the generations before them. This trend will continue to affect the buying power and inventory for homebuyers during 2020.
As the old saying goes, we aren’t getting any younger! Experts all say that rates and inventory are expected to stay low for the foreseeable near future, however, that will not last forever. If you’re ready, willing, and able to purchase a home, it’s worth a conversation with your local mortgage lender. Lower interest rates partially offset the high cost of homes, resulting in more home that you can afford.
To have a quick conversation to see if it’s a good idea for you to consider purchasing a home, contact one of our friendly Mortgage Bankers near you.
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