Taking a look at ShowingTime’s Monthly Index you can see the dip down during the lockdown of the pandemic, the dramatic increase of business in the first part of this year, and now we’re starting to level off. So, we are slowing down, but let’s put that into perspective…
What we are seeing is that while the market is normalizing, we are well ahead of where we were in 2017, 2018, and 2019.
Since the headlines tend to terrify more than clarify, let’s discuss a few headlines you may come across.
While foreclosures are up 49% last month (according to ATTOM Data), that is nowhere near where we were in 2019 – a more normal market.
Refinance originations will drop in 2020, but that makes sense – in a rising interest rate environment, we will see less refinances.
We are seeing a projection for increasing mortgage rates – it will cost more to purchase a home. While mortgage rates are ticking up a little they will remain historically low, and that will support affordability.
According to Freddie Mac, mortgage rates were just under 5% in 2018 and they’ve dropped pretty significantly since then. We hit the all-time low at the very end of last year and they’ve started increase again. They are projected to rise to roughly 3.6% by this time next year. As mortgage rates get higher, it becomes more expensive to purchase a home. Mortgage rates aren’t the only thing on the rise for next year – home prices are forecast to appreciate as well.
Industry experts are averaging out to about 5.1% home price appreciation next year. While appreciation is slowing, it is forecasted to continue to appreciate, just at a slower or more moderate rate (or decelerated rate – not a decline but a slower rate of appreciation). It is going to get more expensive to purchase a home. In addition, supply is low and demand is high, which will also attribute to rising prices.
In 2020, we sold 6.5 million homes which was record-breaking. Fannie Mae, Freddie Mac, NAR and MBA are predicting roughly 6.7 to 6.9 million home sales this year for a strong finish, and potentially exceeding that next year.
Taking a look at Unison’s State of the American Homeowner Report, it is obvious that the pandemic has highlighted a lot of non-financial benefits of homeownership as it has changed the features we need or want in our homes. The report also found that 58% of homeowners felt emotionally attached to their home before the pandemic – now that is 70%.
