With the new year comes a flurry of forecasts and predictions about the mortgage and housing market. In today’s update, let’s look at a few of the outlooks reporting strong expectations for 2021. As reported by Yahoo:
1. Home prices will go up
In 2020, median listing prices grew 13.3%, according to Realtor.com. Experts forecast prices will stay on this upward track.
“As we wrapped up 2020, housing demand continued to be strong, and asking prices continued to post double-digit percent gains over last year, suggesting additional increases are ahead for the Case-Shiller Index,” said Danielle Hale, chief economist at Realtor.com. “Looking ahead to 2021, the economy will be kept in recovery mode thanks to the recent stimulus bill and additional construction of affordable homes in the coming year.”
2. Housing sales growth will be largest since 1980s
Even if home prices rise, that won’t dampen home sales. In fact, growth in home sales in 2021 could be the largest since the 1980s, according to Matthew Speakman, economist at Zillow.com.
“The swell of millennial buyers – with the also enormous Gen Z cohort right behind them – aging into their prime home-buying years and looking to enter the market should also keep demand firm and prompt steady growth in household formation,” Speakman said.
3. Refinance volume will begin to decrease
By the fourth quarter, refinances are expected to make up just 27% of all mortgage originations, down from 60% in the fourth quarter of 2020.
“Refinancing volume should decrease in 2021 largely because everybody already refinanced due to these historically low rates,” said Patrick Boyaggi, CEO of Own Up, a mortgage technology company.
4. Buyers will eye foreclosed properties
A new source of properties may pop up that interests first-time homebuyers and investors: foreclosed homes for sale.
“When the forbearance lifts a lot of investors and first time homebuyers will be able to buy these properties, but prices won’t be similar to 2008 levels,” said Daryl Fairweather, chief economist at Redfin, a real estate brokerage firm.
5. Builders will flock to the suburbs
As privately owned housing units in permit areas saw a 14% uptick year-over year in November 2020, experts expressed larger optimism for housing construction in 2021.
“It’s a really good year for building and I think working from home is going to fuel more residential construction,” Fairweather said. “The strongest demand is single family homes in suburban and rural areas since it’s cheaper for builders and easier to get permits.”
Refi Demand Spikes 20% to Fight FOMO*
*FOMO (slang.) Fear of Missing Out
After setting more than a dozen record lows last year, mortgage rates began 2021 on an upward climb, and that lit a fire under borrowers, fearing they might miss the last of the lowest rates. According to CNBC, Mortgage applications to refinance a home loan spiked 20% last week compared to the previous week – the highest level since last March. Volume was 93% higher than a year ago.
“Booming refinance activity in the first full week of 2021 caused mortgage applications to surge to their highest level since March 2020, despite most mortgage rates rising last week,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The expectation of additional fiscal stimulus from the incoming administration, and the rollout of vaccines improving the outlook, drove Treasury yields and rates higher.”
Weekly Mortgage Rate Update
According to Freddie Mac, pressure is being put on mortgage rates to move up in response to rising Treasury yields. However, while it’s true that mortgage rates are expected to increase slowly throughout 2021, they will still be inarguably low in comparison to previous years, supporting homebuyer demand and leading to continued refinance activity. Encourage borrowers to take advantage and reap the benefits of these low rates.
The Freddie Mac weekly survey shows the average rate for a 30-year fixed mortgage is 2.79%, which is up 0.14 points from last week, and down 0.86 points from this time last year.