January 22, 2021
Even though the coronavirus pandemic put a damper on 2020, the housing market showed great strength, highlighting a contrast to what everyone experienced in one form or another. Now, heading into 2021, demand continues to stay high and is expected to rise in cities as economies reopen steadily throughout the year. Annual home sales growth will be higher than it has been in 40 years as life and financial certainty brings more home sellers into the market to meet the strong demand. Home prices, mortgage rates, and rent are likely to rise, bringing some challenges to people prioritizing affordability in their potential purchase, but improving the mortgage forecast for this year.
But outside of pricing, there are several trends to keep in mind in the housing and mortgage forecast in 2021. Here they are.
Mortgage Forecast: Rates Will Rise
According to Freddie Mac, after the 30-year fixed mortgage rate reached record lows 16 different times in 2020, rates ended the year at 2.67 percent. Rates dipped slightly lower in the first week of this year so far. But homeowners should expect to see rates inching higher throughout the year as the low mortgage rate environment is only temporary.
At this point, rates might end up at more than 3 percent by the end of the year, according to forecasting from Mortgage Brokers Association, down from 2.8 percent in the fourth quarter of 2020.
Foreclosed Properties Will See More Shine
When a forbearance lifts on a home, many investors and first-time homebuyers will try to buy it fast. However, prices won’t be similar to those the economy saw in 2008 following the housing and banking crises. To protect against forbearance, at least temporarily, lawmakers passed the CARES Act in March of last year, requiring lenders to postpone mortgage payments up to 180 days to homeowners who experienced a pandemic-induced hardship. Some homeowners even received an additional 180 days of forbearance if they qualified.
As of this month, there were about 2.7 million homeowners in the middle of forbearance, according to the MBA. Suppose these homeowners continue to miss payments and struggle financially after plans for forbearance ends. In that case, they may end up losing their homes, opening the door to interested parties looking for lower costs on a new-to-them home.
Fewer Refinances
Last year saw a major boom in refinancing as the mortgage rates continued to fall throughout the year. But, not everything is meant to stay.
The MBA predicts that refinancing will slow in the second half of 2021 as mortgage rates tick up slightly. Volume is predicted to fall sharply as the economy begins to find its footing again, and people can stand on firmer economic ground. While mortgage rates will see a rise, enough to discourage refinancing, they’ll remain low enough to engage new homeowners. Even as mortgage rates will be high enough to cut down on refinancing, they’ll still be low enough to keep housing affordable.
About Associations Liability Insurance Agency (ALIA)
The ALIA Team (part of the Riverton Insurance Agency Corporation), specializes in helping real estate professionals find the affordable and comprehensive liability insurance they need, without the hassle. ALIA dates its roots to 1991 with the founding of FREA, Foundation of Real Estate Associates. In 2013, ALIA was created to work with multiple insurance companies thereby broadening the portfolio of products to customers. For more information about our products and services, contact us today at (800) 882-4410.