The home buying process can be difficult to navigate, and the current market has made it uniquely difficult for buyers. Thanks to interest rates at record lows over the past year, there’s been a surge in demand. But combined with the low housing supply throughout the coronavirus pandemic, this demand has created a housing boom.
If you’re preparing to buy or sell a home soon, it’s important to know just what lies ahead of you, so we’re sharing a few housing market trends and summer housing market predictions you can expect to see this year.
Mortgage rates are rising, but they will remain comparatively low
One of the most significant impacts the pandemic's economic recovery has had on the housing market is the low interest rates. In March 2020, the Fed slashed interest rates, causing mortgage rates to reach their lowest levels ever. They’ve remained at historic lows throughout the past year.
That being said, mortgage rates are on the rise. And while the increase might be relatively small, it can still make the difference of tens of thousands of dollars of interest over the course of your loan.
While current low mortgage rates are rising slightly now, it’s not the first time this has happened over the past year. As a result, it’s difficult to know if this trend will continue. That being said, rates are still low when compared to pre-pandemic levels.
Demand is still high, driving home prices even higher
The high demand for home buyers and limited inventory of homes on the market have created a perfect storm to prices rising. According to Zillow, U.S. home values have increased 11.6% over the past year, and are expected to rise by roughly as much over the summer months and the coming year.
Unfortunately, home appraisals haven’t entirely kept up with the high demand, meaning some homes aren’t appraising for as much as the agreed-upon purchase price. For example, if you offer $300,000 for a home, but it only appraises for $280,000, you may be forced to pay the $20,000 discrepancy out of pocket — and that’s on top of your down payment.
Buyers can expect to compete in bidding wars due to limited inventory
Another result of the high housing demand and limited inventory has been a drastic increase in the number of bids on each house. It’s not uncommon for a home seller today to get dozens of offers within days of their house being on the market. As a result, bidding wars have ensued.
These bidding wars have been excellent for sellers, but not as great for buyers. Not only is there more uncertainty as to whether you’ll ever have an offer accepted, but buyers are having to make more concessions.
People buying homes are offering significantly more money as consumer confidence wanes, putting down large earnest money deposits, and even waiving appraisal and inspection contingencies.
It’s important to go into the buying process knowing how much you can actually afford and make note of this price growth trend. Visit an online mortgage broker like Credible to see what size mortgage you might be preapproved for.
The home buying process may take longer than usual
Several factors have come together and caused the mortgage closing process to be slower than usual. First, the large increase in demand has simply created more work for mortgage lenders.
Many lenders have also increased their lending standards as a result of the financial hardship many are facing. In an effort to ensure that only truly qualified buyers are getting loans, lenders have become more strict with their income, employment, and credit requirements. As a result, it may take longer to process each loan.
Housing transactions will rise with increased vaccine rollout
As the coronavirus vaccine continues to roll out, much of people’s lives are returning to a semblance of normal. The mortgage industry is no exception. Many homeowners have been hesitant to sell their homes over the past year due to uncertainty.
This summer, we’re likely to expect more home listings. This could be good news for buyers, as an increase in inventory may help level the playing field a bit.
The bottom line
The housing market – both for buyers and sellers – has been changing rapidly over the past year due to low interest rates, high demand, and low housing inventory. When looking at the summer real estate market, we’re likely to see the continuation of some of those trends, such as increased demand. But we may also see some trends reverse course, as interest rates begin to rise and the vaccine rollout increases inventory.
These market predictions are likely to be seen as the country's economic growth following the COVID-19 pandemic continues, whether you live in San Francisco or San Diego, San Antonio or Los Angeles, or Las Vegas.
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