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According to Fannie Mae’s recent economic and housing outlook, rates will be rising. But, so will homes sales.
Fannie expects strong economic growth from the recent tax cuts and other stimuli in the new budget. Although rates are forecasted to rise above 4%, these should not negatively affect home sales. In fact, it should help.
The increase in household disposable income from the recent tax cuts and continued economic and wage growth should translate into more home sales. This is good news for lenders in 2018.
On the other hand, we still have a shortage of housing inventory, especially at the entry level. According to a recent Zillow study, these so-called starter homes appreciated in value at a rate of 8.5% while other homes gained about 3.5% in value.
This is good news for those who presently own these homes. But, it makes it more difficult for first-time homebuyers looking to enter the market. There are about 18 % fewer of these entry-level homes on the market now than just one year ago.
The competition will be fierce for homes and for the mortgage loans needed to finance them. Some targeted opportunities may still exist for the refinancing of affordable homes. Since the owners’ equity has recovered to pre-crash levels.
Some of these owners may not have refinanced during the boom and may look to either reduce their payments or take some cash to pay down other debts. Others might want to refinance for some cash out for other reason in lieu of a HELOC on which the interest is no longer deductible.
But mainly with the economy improving and rates rising, we’re looking at a purchase market in 2018 and beyond. A market that looks to be better than originally thought with more people looking to jump into housing or move up.
Lenders need to be planning and right-sizing now with an eye toward providing the products and services needed for the homebuyer of the new generation. A generation that expects instant access and information with premier customer service.
This ain’t your grandfather’s housing market. Buyers are more tech-savvy, Realtors and builders expect loans to be approved and closed in a more timely manner and everyone is looking for the best deal with the best service. I guess that hasn’t changed.
BTW, don’t forget about regulatory requirements for QM, ATR, TRID, and now HMDA. You still need to comply. When manufacturing and selling loans, quality and compliance are tantamount to success.
Things are looking up in 2018. But, while you’re looking up, don’t lose sight of where you’re going. It’s still the little things that cause the biggest problems. Be sure to pay attention to the details.
2018 can be much better than originally thought if you plan and execute carefully.
