Mid-Year Housing Market News: Hot homes, hotter rates
While buyers last year faced some headwinds (low inventory, high prices, and higher lending costs), 2019’s historic mortgage rate dips have given homebuyers a huge boost. As we hit the halfway point on the year, we take a look at the last six months in housing, as well as cast an eye to what the future has in store.
The tale of the rates that couldn’t stop dropping…
Mortgage rates have dipped to lows not seen in years through much of 2019, making this an attractive time to be a potential homebuyer. In March, 30-year treasuries enjoyed their biggest weekly drop in a decade, and mortgage agency Freddie Mac says average 30-year mortgages hit 3.82% in June, their lowest mark in almost two years. This year’s plunge in rates has also triggered a serious boom in refinancing, with Freddie expecting a 20% boost in refinance mortgage over last year’s numbers. Buyers who bought a mortgage in the last 1.5 years are the best candidates to benefit from a refinance, however many aren’t even aware of the opportunity—meaning they might be letting this prime opportunity (and potential windfall)* go to waste.
What could happen with rates going forward?
While current employment and inflation data appear favorable, fears of a global slowdown and trade concerns are chief among concerns for the central bankers who set interest rates. The Federal Reserve has given indications that it is considering a rate cut, possibly by the end of July.  While this may or may not occur, markets tend to be forward-looking and appear to be ‘pricing in” a rate cut for July. Thus, for homeowners looking to lock in a mortgage, this could be an attractive time to do so.
Rising prices—and demand
Across the national housing market, persistently weak production of new houses and apartments is often not meeting the increasing demand. New home production has been hampered by a skills gap among certain parts of the construction labor force, which has driven up labor costs and slowed new home production. This low inventory of homes on the market, combined with growing demand among buyers, is often combining to create price increases in many major markets, with data suggesting home values are expected to rise 4.1% nationally by the end of the year. If these trends hold, homes are only going to get more expensive, providing yet another reason why now might be the best time to buy.
While the motivated buyers in a market can vary region by region, in general there’s one group that is driving home purchase: millennials. Many millennial would-be buyers have been waiting to get into the housing market since the Great Recession, and now account for the largest group of potential homeowners. Many millennials are motivated to finally stop renting and want to the chance to finally start paying their own mortgage and stop paying their landlord’s. However as more millennial buyers enter the market, they’re increasing demand, and thus prices, on entry-level homes.
So, what’s it all mean?
Rates are favorable at the moment, making it an opportune time to buy if you’re a first-time homebuyer. The outlook on rates means it’s also a good time to refinance if you’re presently a homeowner. If you are looking to buy, expect a competitive environment with high demand leading to quick turn-around times on properties, and many motivated sellers. The low inventory of housing in some markets is also leading buyers to consider renovation properties as a way to find the right home in the right neighborhood. And as always, buyers are best served if they can be as prepared as possible for the homebuying process.
Have all your documents in order, understand your price points, and explore the benefits of getting pre-approved by a quality lender.
*Savings, if any, vary based on consumer’s credit profile, interest rate availability, and other factors.