The housing market in 2019 was dominated by limited supply, high demand, and low rates, primarily in the lower-priced end of the industry. As for 2020 and beyond, some experts predict more of the same, while others have predicted some marked changes that will take the real estate market by storm. Here, we will discuss some of the trends to look for in 2020 regarding the real estate mortgage industry and the real estate market at large.
Mortgage Rates Will Either Remain the Same or Go Down Slightly
While mortgage rates will fluctuate depending on where you live, Freddie Mac’s most recent numbers had real estate mortgage rates sitting at roughly 3.75%, which is nearly a 1% difference from what the monthly average was a year ago.
As such, the drop in rates caused an upswing in refinancing over the last three months, as purchasing activity also enjoyed a surge during the same period.
Moreover, the chief deputy economist at First American, Odeta Kushi, has claimed that there is an emerging consensus amongst real estate mortgage experts that rates will continue to be low this year, with the predicted range being between 3.7% and 3.9%.
In sum, refinancing is expected to increase in popularity this year, and some homeowners will be able to buy bigger or nicer homes than in previous years thanks to the reduced rates.
Housing Prices Will Go Up
Now, while mortgage rates are expected to remain low, the actual price of homes is expected to go up this year. This is mainly due to the increased demand, as an increasing population combined with limited housing space has led to a spike in home prices.
In fact, CoreLogic, a prestigious property data firm, recently released a forecast that claimed that the price of homes should increase by 5.6% by next September, which is up from the 3.5% tick that was seen in 2019.
The number of new listings is also down when compared to the same period last year, so the real estate mortgage industry can expect more price pressure this year, with prices expected to reflect this added pressure.
Interestingly, the problem is expected to be exacerbated on the lower end of the pricing spectrum, as the price for entry-level or “starter” homes will go up higher than the incomes generated in 2020. In other words, incomes will not be able to keep up with inflation.
Furthermore, the disappointing construction numbers that have just come in indicate that the issue will be further compounded this year. In other words, expect builders to invest most of their time and resources in high-end homes that will yield higher profit margins over starter homes that produce modest returns.
Millennials Will Continue to Take Up Market Share
Given the fact that most millennials value homeownership over having kids and getting married, it’s little wonder that they made up 46% of all mortgage organizations in September of 2019, according to data from Realtor.com.
Meanwhile, mortgage activity declined among Gen X and baby boomer generations during the same period. Hence, expect millennials to capture even more of the market in 2020, as millennial incomes are up this year, and interest rates are currently low. If you are interested in procuring a real estate mortgage, please visit Northwood Mortgage on our website.
