A month before we leave 2016, speculations start to arise as to where mortgage rates would stand in 2017. What would be the new normal and how will this impact potential buyer and homeowner decisions?
The influence of the US election results caused an unprecedented rate hike that put conventional 30-year FRMs on a new 4 percent mark. This, after almost half a year of near record mortgage lows at the outset of Britain’s EU exit. Will the new rates continue a steady march?
Mortgage experts put in predictions for the next year’s mortgage climate, putting into consideration not just rates but also market movements and stakeholder conditions:
Stimulus invites response. When the Brexitlows started to edge higher after the elections, many homebuyers started rethinking their decision to purchase. Those who were fast to decide locked in before the rates rose even more. Those homeowners who have home equity lines of credit can expect ups in their payments as well. That, on top of the incoming HELOC resets.
Prices in overheated markets especially, are experiencing adjustments as wages struggle to cope with the price boom. As a result, more buyers from these areas are shifting their attention to deals within city outskirts.
Homebuyer expectations drive the corrections as well. Millennials, for example, who are predicted to take a large chunk of homebuyers in the next year, are reevaluating their decision to sell because of market inflation and a foreseen continued rate hike. Nobody would want to sacrifice their rates – especially those who have taken advantage of historic lows – for future rate uncertainties. This might contribute to more price corrections in the impending year.
More millennial homebuyers
Many millennials are still uncertain on the question of homeownership. But as the latest generation gets older, more of them are starting to reconsider their options. Although affordability still poses the primary roadblock, higher wages and other positive trends point to a pattern of increasing appetite for homeownership among the Generation Y. Mortgage programs with low down payments are seen to be their best options.
Shortage in housing supply
The scarce supply of available housing in 2016 will continue to drop in the next year as it will require more time for construction to close the gap between demand and availability. Moreover, refinancing, which in this year has taken some significant chunk of the pie because of the historic low rates, is expected to stay put for now and will likely be reduced in numbers in 2017. This is good news for those who plan to put their houses on the market soon as predicted increase in purchaseand low supply will most likely spike up their sale price.
The comeback of boomerang buyers
Millions of American homeowners who experienced the housing horrors during the crisis in 2008 are expected to make a comeback in 2017 after the seven-year black-mark period. This will further increase boost in home purchase, despite the fact that this group is perceived to be more cautious in their home buying endeavor.
Increased purchase despite predicted inflation, higher rates
Purchase will regain footing from this year’s refi reign. Inflation is also foreseen, along with a departure from historically low rates.
Socio-economic and political factors will continue to shape the mortgage climate in the future. As the new year dawns and a new administration is put in office, there will be more to expect, and much to speculate about what will be in the US Housing industry, along with a demand for paradigm reset and industry innovation.