June 20, 2018
After hitting historic lows during the recession, mortgage rates are currently the highest they have been in the past four years thanks to a healthy economy and strong job market. These rates are still expected to rise in the coming months, potentially reaching their highest points since 2011. As rates change, lenders are continuing to adapt to meet the demands of the housing market.
Although buyers will still struggle to find houses for sale, inventory is expected to slowly increase in 2018. Builders are expected to focus on entry-level homes, catered to the millions of millennials in the market. This increase in construction and inventory will start to slow home price acceleration. Home values are expected to increase at around 3-4% for 2018, which is lower than the 6% growth experienced during the last two years.
The refinance share of the market is expected to drop to roughly 25% in 2018, the lowest it’s been since 1990. When rates have risen in the past, average credit score requirements imposed by lenders have decreased and new programs have been established to maintain loan volumes. Homeowners seeking to refinance their current loan may find attractive programs in the coming year, even if rates are a bit higher.
While rising rates will continue to slow down refinancing, millions of homeowners will tap into their home equity this year. Owners are expected to take advantage of rising home values by using a home equity line of credit (HELOC) for debt consolidation, home improvements, or to refinance an existing Home Equity Loan. According to a recent TransUnion study, roughly 1.6 million homeowners are expected to get a new HELOC in 2018 – a 16% increase compared to last year.
As average rent costs continue to increase at a steady rate, homeownership will be much more enticing to millennials. In 2017, roughly 40% of all mortgage originations were made by millennials, and that number is only expected to rise in coming years.
While rising rates may seem like a bad thing up front, it is generally a strong signal of a booming economy. As the real estate market continues to shift, it is crucial to partner with a lender who is up-to-date on the latest statistics and trends when looking for a home loan. With the costs of buying a home on the rise, homebuyers should be on the lookout for added features when selecting a lender, such as access to online and mobile applications, local processing, and first-time homebuyer programs. Most importantly, check referral sources and work with a lender whom you trust!