Three Real Estate Trends To Be Mindful Of This Year

It’s completely normal for you to have questions about real estate in the new year. The times and rates are constantly changing, and I know how concerning that could be for everyone, given the boom we had last year.

One of my personal goals is to be a reliable and valuable source of information and news for my clients.

That’s why I’m focusing on three important trends we should all be mindful of in the new year for this blog.

Trend #1: iBuyers are growing, but its premise still has an underlying problem.  

In case you are wondering, iBuyers are real estate companies that use technology to make an offer on your home straight away. iBuyers buy houses for a price based on a real estate algorithm, allowing you the choice to make a non-contingent or cash-like offer at will.

While this idea may appear great on the surface, it does not mean that these real estate tech companies will get everything correct for your home buying process.

From a realtor standpoint, algorithms that iBuyers use for their homes and pricing do not consider realities like the pandemic. In this case, the pandemic created a much faster-moving market that neither iBuyer companies nor prospective buyers accounted for in their home-buying goals.

While iBuyers are slowly gaining popularity, this experience proves that algorithms cannot price homes on a large scale.

Your real estate agent or mortgage broker and their ability to appropriately price and successfully market your home are important.

Trend #2: Interest rates are rising but are still exponentially lower than before.

Since the Great Recession, mortgage industry observers and economists have predicted rising interest rates annually. Over the past decade, mortgage interest rates have risen and fallen.

With coronavirus hitting us, mortgage interest rates dropped below 3 percent.

Economists like Lawrence Yun (chief economist of the National Association of Realtors) and Mike Fratantoni (the chief economist of the Mortgage Bankers Association) say that interest rates will rise in the new year. Furthering this idea is Fed Chair Jerome H. Powell’s pronouncement that the Federal Reserve will be raising the federal funds rate three times this year while also phasing out the bond-buying program.

While interest rates are trending higher, they are still exponentially lower, historically.

And despite those low-interest rates, now would be a good chance for current homeowners to refinance their loans to cut their monthly payments, take out some equity to pay off high interest credit cards and loans, or make home improvements.

As a seasoned mortgage broker with 19 years of experience, you can take a deep breath and trust me in this process, should you choose to refinance any loans.

Trend #3: Millennials and Gen Z may find it unaffordable to buy a home, but it is still possible.

If interest rates rise, millennials and Gen Z home buyers will see how unaffordable it is to buy their first home. Importantly, Millennials make up for the home-buying population right now.

According to CoreLogic, U.S. home values climbed at an annual rate of 18% in October last year, which was the highest percentage recorded in the history of the index. For single-family homes, those increased to 19.5%.

While this growth appears good, that kind of growth is unsustainable. Because home prices are closely tied to income, something has to change.

If this particular trend continues, three ideas would have to happen:

  • People will have to earn more income,
  • Interest rates will have to stay low,
  • Or home prices will have to decrease to get everything back in balance.

Contact Me

At the rate the industry is changing, if your head is spinning with these trends you’re not alone.

But staying informed is never a bad idea.

These projected trends should not stop you from accomplishing the dream of homeownership.

That’s where I come in!

Get ahead of the curve and give me a call or shoot me an email at anytime!

* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.