You bet your sweet bippy it is* if you can find one. That’s according to the results of the most recent Fannie Mae Homebuyer Sentiment survey. The swaying factor is the result of current renters saying they believe that now is a good time to buy a home.
This is happening despite rising rates, increasing home prices, and a diminishing supply of affordable homes on the market.
The caveat is that the high price of homes today is still the biggest barrier to homeownership. So, why are consumers becoming more bullish on owning a home?
It could be that many believe home values have peaked and, with rates rising, values will soon stabilize or even decline slightly in some areas.
Others may see the signs of the easing of credit standards by lenders which would help more consumers qualify for the home financing they need. A slight increase in rates may not deter these hopeful buyers.
If we learned anything from the last presidential election, it’s that we can’t always trust poll and survey results. It all depends on what questions get asked and how they are answered.
Based on the Fannie survey, an increasing number of renters say now is a good time to buy, but the numbers may indicate otherwise. Inventory is down and home prices continue to rise. Any rate increase will make it more difficult to afford a home. Pending home sales are down over the past six months.
Although now may be a good time to buy, can an interested homebuyer find a home they can afford in an area they want to live, with the amenities they want? That’s the big question.
Millennials say no. Maybe somebody should do a survey…
However, this is still good news for lenders. With builders increasing production, more new homes are coming to market.
Although these new homes may be at a higher price point, they represent an opportunity for some move up buyers or those in a position to jump in at a higher level, like some Millennials.
Current homeowners with increased equity in their present home have a special opportunity to move up. All of these sellers and buyers represent more opportunities for lenders.
To take advantage, lenders need to be very familiar with new construction lending. It ain’t exactly the same as lending on an existing home.
If the Fannie survey is accurate, we should see more renters and first-time homebuyers coming to market. This is great as these present more lending opportunities, but they also present more challenges.
These type of buyers and borrowers need a little more hand-holding and assistance when going through the home buying and financing process. It’s their first time. You must be gentle.
You need the products to serve their needs. You will need products with minimal down payment requirements, maximum allowable DTI and eased credit standards. We may also see some resurgence of ARM loans. Remember them? You might, but do your LO’s and staff?
We’re entering a new age of mortgage lending in 2018; an age with rising home prices, increasing rates, lower home inventories, and decreased refinance activity.
Aside from the challenges created by this market, lenders face quality and compliance issues resulting from process digitalization, identity thefts, fraud, with increased regulatory requirements and oversight, all of which increase the cost of loan originations.
Are you prepared to meet these challenges? To ensure that the loan applications taken are for loans that will close, perform as expected, and be saleable? You may need to ease some credit standards to compete in the new market and to produce and close more loans, but do not sacrifice loan quality or compliance to do so.
It may be a good time for some to buy. As long as they can find a home they want and can afford the price to buy and maintain it. When that happens, it’s a good time to lend. As long as everyone understands and carefully manages the risks involved.
Editor’s Note: “Bet your sweet bippy” refers to a phrase popularized by Rowan & Martin’s Laugh-In, a zany television show from the late 1960’s. The word bippy, by the way, refers to ones “butt.” The phrase “You bet your sweet bippy” is a linguistic descendant of earlier versions that go back to at least the 1880’s when phrases like “You bet your sweet life” were commonly used.