If you’re planning on buying a home this year, it may be worthwhile to understand what trends will be shaping the industry in the next 12 months. While the basics of home buying will stay essentially the same, these trends may be enough to completely alter the experience. Learning about them now can save you time and trouble down the road.
It’s Still a Seller’s Market
The number of homes for sale in 2019 has risen and is expected to continue rising, but the availability of homes still won’t outnumber potential buyers. This means it will still be a seller’s market for the foreseeable future and home prices are expected to stay high. The only way this is likely to change is through a surge in the number of new homes constructed, but even that doesn’t seem promising. According to Freddie Mac, the number of new homes constructed in 2017 was 370,000 lower than what was needed to fill the demand.
Mortgage Rates Will Continue to Rise
In 2018, the interest rates on 30-year mortgages rose by about three-quarters of a percent. That increase brought the fixed rate up to about 4.75% by mid-December. The rates are expected to continue to rise and most lenders, including Chenoa Fund Loans, are expected to reflect those increases. On the bright side, the increase won’t be as much as we saw in 2018. Freddie Mac anticipates seeing an increase of no more than half a percent, while a 0.4% is estimated by the National Association of Realtors. Fannie Mae offers the most favorable forecast, expecting to see an increase of no more than 0.1%.
Home Ownership Will Be Less Affordable
Between rising home prices and a steady increase in interest rates, many financial experts are expecting to see home ownership become less affordable. This may prevent many potential home buyers from staying in the market, but that will depend on income levels. For those looking for homes near the $300,000 mark, the interest rate increases may boost monthly mortgage payments by $75 to $100. While this is a significant amount, it may not be enough to affect those within that buying range. For those in a lower income bracket, however, waiting for the markets to drop may be the only option. Alternatively, home purchases are expected to rise in El Paso, Texas; Tulsa, Oklahoma; and Chattanooga, Tennessee, where the markets are more affordable.
New Constructions Are Meeting the Demand
Real estate investors are recognizing the need for more homes and for homes at affordable prices. The answer to this demand is smaller new home constructions. By building homes with lower square footage, more homes can be built on the same plot size and those homes can be offered at lower prices. The sizes of new homes have been dropping over the past three years, making first-time homeownership easier and more affordable.
Getting a Loan Will Be Easier
Following the bursting of the housing bubble, lenders tightened restrictions on mortgages. This was an effort to ensure borrowers would be able to repay their loans, but lenders have discovered that the restrictions may be too tight. Instead of the problem of borrowers being unable to repay, lenders are now faced with too few borrowers qualifying for the new terms. As a result, we expect to see lenders loosen their restrictions in the near future. Home buyers in 2019 may not be required to submit as much documentation, may qualify with lower credit scores, and may be able to offer smaller down payments.
If your goal is to buy a home in 2019, understanding that you may pay more is important. While restrictions on lending may be more lenient, that may not be enough of an incentive if home prices are out of your affordability range. If you do buy a home this year, keep an eye out for dropping interest rates, so you can refinance when the rates do begin to come down. This may be the best way to make your home more affordable over a longer period of time.
