What Mortgage Rates Will Do Next Year

What Mortgage Rates Will Do Next Year,
(from people who usually get it wrong)

Bajak and Associates

Looking back at the events that have derailed mortgage rates’ return to ‘normalcy’ over the past few years is unsettling

Rates for home loans have spent the past decade or so doing anything but what’s expected of them. Every year, it seems, the general consensus is that in the coming months, financial conditions will finally get back to “normal,” taking mortgage rates with them. And every year something has brought that “normalization” to a screeching halt.

In 2015, for example, shock-and-awe bond-buying by the European Central Bank helped push bond yields into negative territory in Europe and behind. In early 2016, markets were rocked so badly by concerns about earnings that there were fears of another recession – and then rocked again by the upset Brexit vote.

2017, which started off with concerns about surging bond yields under a pro-growth, anti-tax president, instead saw many months of a “Trump slump” when tax reform took a while to materialize.

Mortgage rates in 2018 may be the closest thing to “normal” we’ve seen in a long time. With two more weeks in the year as of this publication, we’re likely to see a full-year average of 4.54% for the 30-year fixed-rate mortgage. That will be the highest since 2010.

And for 2019? Given all the variables in both financial markets and housing, forecasting mortgage rates is for the “intrepid,” in the words of Mark Zandi, chief economist for Moody’s Analytics, and a long-time housing watcher. And those are just the known unknowns. Who can guess the curve balls lying in wait in financial markets, earnings, economic data, housing markets, and beyond?

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By Andrea Riquier, MarketWatch

Are Lenders Prepared for the Borrower of the Future?

Are Lenders Prepared for the Borrower of the Future?

Bajak and Associates

Uber. Zipcar. Airbnb. New concepts that are now mainstream and indicative of the demographic, financial, technological and cultural forces transforming America and reshaping how people think of themselves, their families and their future. The market is changing and along with it, our home buyers.

To prepare to meet the evolving needs of the next generation of home buyers, we need to understand them. That’s why Freddie Mac is studying the behaviors and attitudes of different demographics and their views of home ownership. They’re also partnering with thought leaders on future trends – such as New York University Professor Arun Sundararajan – to shed light on how emerging trends and socioeconomic shifts, such as digital technologies, affect home ownership.

Their goal is to help lenders better understand the hopes and fears, characteristics and challenges of the Borrower of the Future as they relate to home-ownership and find ways our industry can innovate to address the emerging market realities.

Here are some key trends to consider:

• America is becoming a more diverse nation, and our ideas about family, tradition and independence are becoming more diverse too.
• Optimism about home-ownership is on the rise in minority communities, and as America becomes a “majority-minority” nation, that may change our idea of what “home” means – and who lives there.
• The nature of employment is changing, with more self-employed and contract workers and the digital age allowing work to be done from virtually anywhere.
• In an on-demand world, no one wants to wait. Younger borrowers expect a frictionless, digital-first experience.
• With many coming of age in the Great Recession, the Borrowers of the Future tend to have lower levels of accumulated savings.
• Baby boomers are “aging in place” and millennials are likely to live with their parents.

These are just a few of the trends. For more, including the latest article by Professor Sundararajan's, "How the Sharing Economy Could Transform the US Housing Market," visit www.borrowersofthefuture.com. The article is the first in a series that will examine how the sharing economy and new ways of working are altering the home buying process.

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Source: FreddieMac, July 3, 2018.

2017: Residential Real Estate Outlook

Residential Real Estate Outlook in 2017

The year 2016 proved to be a hot one for real estate.
Home prices and sales showed some of their strongest numbers since before the economic downturn a few years ago.and mortgage rates were downright cheap but there’s no guarantee favorable conditions for buying and borrowing will continue in the months ahead. Consequently, it’s fair to ask the question: Will housing prices keep climbing into 2017?. Though no one can tell the future, the housing market forecast can help potential buyers make better decisions in 2017.

Home Prices Near Peak
Home prices continue to post steady year-over-year gains and are nearly back to pre-recession highs. In July, for example, the national median home price for single-family homes and condos collectively was $226,500 – an increase of 7% from a year earlier and the 53rd consecutive month with a year-over-year increase, but looking closer at market indicators reveals further truths.
After several years of steady and steep price growth, we are seeing indications that price growth is slowing and the market is normalizing. Housing market data indicate that home prices in August rose just 4.4% compared to 2015 — the slowest pace of the year.

Housing Market To Normalize
Based on these indicators, 2017 will bring a more normalized housing market : 54% predict prices will rise somewhat next year and 36% predict prices will level off. In 2017, we’re also projecting another modest increase in total home sales. However, three major factors continue to challenge the housing market’s recovery: tight credit, Limited inventory, and rising prices, which are beginning to create some affordability problems in certain markets.

Home Appreciation will be slow, but steady
This appreciation slowdown could be accelerated by rising mortgage rates but even without rising interest rates, some markets are now hitting affordability and inventory constraints that demand will slow down. And as demand slows, inventory will gradually increase in 2017. Many parts of the country could see a small dip in property values over the next six to 12 months, but real estate, for most people, should still be thought of as a long-term hold with a great tax write-off, forced savings plan, and long-term appreciation.

Rising Rent a deciding factor in 2017
Considering these housing market forecasts, many professionals say it’s wise for prospective home buyers to think about purchasing relatively soon. Mortgage interest rates remain low and housing price are rising. with rates at historic lows, buyers may be able to find a home with a monthly mortgage payment that is less than or equal to rent. The conditions that challenged first-time and millennial home buyers this spring are starting to ease. There are fewer bidding wars and less of a need to escalate significantly above the list price to get an offer accepted. And the pace of the market is also slowing, which helps buyers since they can now afford to be more patient.


Should Buyers hold Their Purchase?
Purchasing sooner versus later can be smart — so long as you view the home as a long-term investment. It’s probably not the best time if you are counting on your home value going up by another 20 or 30% in the next three years. The rock-bottom interest rates make it a good time to be a borrower, but don’t expect interest rates to rise dramatically in 2017. Trying to time the housing market can be as frustrating as trying to time the stock market, waiting for the next real estate crash and prices to go lower really isn’t a good strategy; it’s much more likely that home prices will continue to go up over time and that interest rates will ultimately rise.

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