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Housing Market Forecast 2021:Industry Changes & Future Outlook

July 7, 2021
While things seem to be returning to “normal” we are still experiencing an incredibly hot housing market. Interest rates and inventory remain at the center of housing conversation BUT there are other changes happening in the market. In addition to forecasted trends in mortgage rates and home inventory, there are many other important changes happening within the industry that will shape the housing market through 2021 and beyond.

Federal Housing Finance Agency (FHFA) Director Change

In June, Mark Calabria stepped down as Director of the FHFA. This change  is seen as positive in the Real Estate and Lending communities.  Calabria was dedicated to bringing Fannie Mae and Freddie Mac, the two largest federal backed home mortgage companies, out of Government Conservatorship and making them private again. In order to do this, FHFA imposed additional costs on both borrowers and lenders. The new Acting Director, Sandra Thompson, will instead focus on making access to credit easier and more affordable to consumers. Additionally, FHFA will look to better assist first-time homebuyers and low-to-moderate income families.

Second Home and Investment Properties

Under the previous FHFA Director, FHFA took the stance that Fannie Mae and Freddie Mac had too many loans for second homes and investment properties in their “inventory” and believed Fannie Mae and Freddie Mac were created to promote homeownership in the form of primary residences. It was the belief that secondary and investment property  loans should be handled in the ‘private’ sector for securities.  As such, they again increased rates – considerably in many cases for these types of loans. We are hopeful that under new direction, FHFA will reverse this stance and make it more affordable for consumers to purchase second homes and investment properties, as these segments do significantly help the housing market.

Federal Housing Administration (FHA) Changes

FHA loans are federally backed loans targeted towards first time homebuyers. Requiring as little as a 3.5% down payment and low credit score requirements, this loan option can make it easier for first time homebuyers to achieve homeownership.


FHA has announced updated student loan calculation requirements that benefit consumers. Previously, on a student loan the Loan Officer was required to count 1% of the outstanding student loan balance in the Debt to Income Ratio. Now, FHA is only requiring Loan Officers to include 0.5% of the outstanding balance.

 

What does this mean for you and why should you care about the guideline change? If you were on the cusp of qualifying or didn’t qualify for the amount you were hoping for, you now have more buying power.


 Mortgage Interest Rates

Ok, now let’s talk about everyone’s favorite topic, mortgage interest rates. As you likely know, interest rates were at record lows in 2020. Overall, the outlook on interest rates is favorable.  At the beginning of 2021, we shared that many experts projected an increase in interest rates as things began reopening and the economy rebounded from the COVID-19 pandemic. The predictions did hold true and many are continuing to project a continued slow rise in interest rates through 2022. The Feds have gone on record saying that any increase in rates will be gradual and focused on ensuring a stable housing market.   The latest Quarterly Forecast from Freddie Mac states:

 

“We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.”

 

While this is a projected increase in interest rates, for perspective, the average 30-year fixed mortgage rate in 2019 was 3.94% and in 2018 was 4.54%. When looking at rates through a historical lens, they remain incredibly low. The same report from Freddie Mac goes on to say:

 

“While higher mortgage rates will help slow the pace of home sales and moderate house price growth, we expect overall housing market activity will remain robust. Our forecast has total home sales, the sum of new and existing home sales, at 7.1 million in 2021...”


 Inventory

While 2020 brought record low interest rates it also brought significant inventory challenges which drove competition in the market. Here’s the good news! According to George Ratiu, Senior Economist at realtor.com, there are signs that inventory challenges may begin to ease up. He states,  “We have seen more new listings this year compared with 2020 in 11 of the last 13 weeks.” 

 

Additionally, new construction has picked back up. Robert Dietz, Chief Economist at the National Association of Home Builders writes, “As an indicator of the economic impact of housing, there are now 652,000 single-family homes under construction. This is 28% higher than a year ago.”


While competition remains high and we persist through a hot seller’s market, the projected steady increase in inventory coupled with growth in home construction could open the market up and allow more families to find the home of their dreams. 


If you are ready to start your home buying process or have questions about your current situation, please reach out to our team of experienced loan officers for a consultation. Fairway Mid-Atlantic is dedicated to serving you and your family no matter your situation.


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Q1 Recap

By Mikaylah Collins • April 12, 2023
We've begun to see signs that the Spring Market is here and could be robust! Here is what we know: According to NAR, home sales were up 14% in February over the previous month which marked the biggest monthly increase since July 2020. While March results are not yet published, the mortgage industry saw an increase in purchase applications for the 3rd straight month; a great sign for the housing market. Driving much of this activity is the stabilization of rates in January & February and lower interest rates this past month. We’re starting to see signs of a slowing economy and the markets are now pricing this in. This week we saw the 10-yr Treasury drop under 3.4%, a level it has not reached for quite some time and the lowest it’s been since September 9, 2022. This is great news for consumers as decreasing rates mean more home affordability. Over the past year, most markets have seen home prices stabilize if not even decline, albeit by a very small amount. This stabilization was still a relief for homebuyers as it helped to offset higher interest rates. As rates continue to decrease, we would expect home prices to again increase due to demand increases. In addition to increased demand, there is still a shortage of homes for sale nationwide and that will continue to worsen as more and more homebuyers enter the market.  So what does it all mean? Now is a GREAT time to buy a home! Rates and home prices are stable, there is not as much competition as there will be when rates do decrease, and buying a home is still extremely affordable for most. Once rates fall, we will likely see home prices rise and the competition for the shortage of homes will increase alongside it making the window of a buyer-dominated market very small.

Q1 2023 Market Outlook

By Sarah Rubin • February 10, 2023
We are well into Q1 and feel confident saying that the market appears to be stabilizing. Before we start looking forward, let’s quickly look back at the end of 2022.

Finding The Right Listing Agent For You

By Sarah Rubin • December 15, 2022
Buying a home is a huge investment and one we talk about often - BUT the flipside is that you have an opportunity to cash in on that investment when you’re ready to sell your home! While you do have the chance to cash-in, a lot more work goes into selling a home than you might think! If you are considering selling your home, working with a listing agent will help you market your home, negotiate with potential buyers, work through paperwork, and ultimately close on your home! So what is a listing agent? In its most basic terms, a listing agent is a real estate professional who represents the seller in a real estate transaction. The listing agent lists the home for sale and works on behalf of the seller to sell the home at the best price and terms for their client. Listing your home is a BIG deal and it is not a place to try and DIY. But why can’t you just grab a sign at Home Depot and try and sell yourself? Well, there are lots of reasons some of which include: Professional consultation: A listing agent will walk you through each step and tell you what to expect along the way! They should understand the specific community you’re in and the current market environment and will help you determine a competitive but realistic asking price for your home. Marketing and selling your home: Your listing agent will list your home on the multiple listing service (MLS) in order to better market your home to potential buyers. They also can make staging recommendations and hire a photographer to best show off your home and its features. They’ll schedule house showings, and can be present to answer any questions. Communication and negotiation: Communication is key to both buying and selling a home in order to minimize stress and misunderstandings. Listing agents take care of this important task, by staying in touch with interested buyers and their agents, fielding questions, handling paperwork, and negotiating the final sale price and terms. Recommendations: Seasoned listing agents might come with a list of professionals who they have worked with in the past that they enjoy working with in order to make the selling process smoother for you! Some of these professionals include: real estate attorneys or title companies, inspectors, stagers, those who specialize in home improvement AND of course trusted Loan Officers. How do I find the right listing agent for my situation? In order to find the right listing agent for you, make sure your agent is licensed and has experience, references, and a professional website where you can learn more about them and their qualifications. Most real estate agents work with both buyers and sellers, but some might specialize in one or the other. Once you find a few agents through referrals or online research, meet with them in person to ensure they meet your needs and work well with your personality. It is also important to ask questions during your meeting with them and it’s imperative that you determine what you’re looking for in an agent so you make sure you are happy with the product being delivered. Selling a home can be stressful, especially for first-time sellers. A listing agent can help by taking on some of the burden and providing the information and resources needed to help sellers make informed decisions. We work with agents on both sides of the transaction – if you have any questions or would like a recommendation for an agent in your area, please reach out to us!
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