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Mortgage Industry Trends in 2020 (and Predictions for 2021)

2020 has been a strange year, nothing close to what we expected when we were celebrating New Year’s Eve in 2019! So why would we expect the most recent mortgage industry trends to be anything but odd? That’s right; there are some interesting patterns that might surprise you if you’re in the market for a home in 2020 or 2021. But it turns out most of the mortgage industry trends for the next year are actually positive for both buyers and sellers. So if you’re ready for some good news this year, check out some of the latest mortgage industry trends.

Demand for Houses Will Stay High

If you’ve been looking at houses lately, you might have noticed how quickly most real estate is being snatched up. Quality homes do not stay on the market for long, showing there’s a high demand right now. In any other year, homes sales in the fourth quarter drop quite a bit, as fewer people buy in the fall and winter than in the spring and summer. But this year, that likely won’t be the case.

In fact, experts at the National Association of Realtors (NAR) predict that this fall and winter could be the best fourth quarter in a while! This means the housing market won’t experience the same drop in home sales it usually does. Maybe that’s because that drop already happened earlier this year, mainly in March when everything shut down suddenly. At that point, it seemed that buyers and sellers took time to regroup.

But by summer, they were ready to take another look at the housing market. That’s why July had a 24% increase in home sales compared to June, with a nearly 9% year over year increase, according to NAR’s chief economist. That pent up demand for homes in the summer made up for the slower spring market, apparently! Add to this the fact that inventory is lower than usual due to the pandemic—as home construction had to stop temporarily—and you can see why experts predict that the housing market will continue to be competitive for the rest of 2020. That’s great news for sellers.

Higher Prices…But Lower Monthly Payments

As you might expect, higher demand for houses means higher prices in general. This is one of those mortgage industry trends buyers don’t want to hear about, especially during a pandemic when so many people are working with a lower budget due to job loss earlier in the year. In fact, according to Black Knight, more than 6 million homeowners were in forbearance with their mortgage lender at some point this year, due to the pandemic.

Fortunately, 41% of those homeowners have been able to exit their forbearance plan in recent months. A big reason so many were able to keep their house despite drastically reduced income this year is the high amount of equity they had. Black Knight reported that the vast majority of homeowners struggling to pay their mortgage this year had some equity. This would allow for some options, such as a cash out refinance so they could pay for other expenses or even any necessary home improvements. And of course, being that home prices are so high right now, they could also sell their home for more than they could have last year.

If you’re thinking about buying this year or in 2021, mortgage industry trends like this one might not seem encouraging. However, there’s a surprising silver lining here, and it’s that mortgage interest rates are super low right now! So what does that mean for you? It typically means your monthly mortgage payment will be a little lower than you might expect. After all, the interest rate on a 30-year fixed rate mortgage recently dropped below 3%, which is a record low!

Similarly, 15-year fixed rates are at about 2.37%. And mortgage bankers predict that these low 15 and 30-year fixed rates will continue to stay low for the rest of 2020 and 2021. So if you want a low monthly mortgage payment on your dream home, now is likely the time to buy! At the very least, you can talk to a mortgage lender to find out your options and stay updated on mortgage industry trends for the rest of 2020.

Buyers Are Looking Outside of Big Cities

It used to be that many people wanted to be right in the middle of all the action—or at least down the street from major businesses so they could have a short commute to work! But with the pandemic, that’s changed. More people are looking to sell their spot in the city—or end their high-rise apartment lease—and buy a home in the suburbs.

This is largely because more people than ever are now working remotely, so the commute to work is not nearly as big a factor as it once was. This makes suburbs and even rural areas more appealing than before. Add in the fact that you can usually get more house—and land—for your money outside of the big cities, and you can see why people are leaving densely populated areas this year. More specifically, one study found that moves out of the city were up 50% year over year, with top cities people were leaving including New York City, San Francisco, Los Angeles, and Washington, DC.

If you’re thinking about doing the same, it may be a good idea to look at the mortgage loan options available to you outside the city. For example, USDA loans can be used to buy homes in rural areas, so you might be eligible for this program if you’re leaving a major metropolitan area in favor of a rural setting.

On the other hand, if you’ve always had your heart set on big city living, now is the time to look at homes in one, as the decreased demand in big cities has reduced pricing a bit. Of course, there’s no telling if this will be one of the mortgage industry trends that’s long term or only temporary, so it’s best to buy now if you want to save on a home in a major city.

New Homes Will Take Longer to Build

If you’re thinking about buying a brand new home in 2020 or 2021, one of the mortgage industry trends to keep in mind is that the pandemic definitely delayed new home construction. As of March, this industry had tumbled by about 22% compared to the previous month, as companies had to either pause projects completely or follow government regulations in order to keep building. As a result, you should definitely expect to wait longer for a brand new home to be built.

Even if you’re able to build a new house within your desired timeframe, remember that you’ll have to make appointments for design center visits, walk-throughs, and other important milestones in the home buying process. You might even have to make these visits virtual, or at least limit the number of people involved. This can further delay your home buying timeline.

And if your state has been hit by natural disasters this year—like hurricanes or wildfires—expect even more delays. So while investing in a home is still a wise idea—possibly more than ever due to the low interest rates—just keep in mind that building from scratch could take a few months longer than usual.

No matter what type of house you plan to buy, you’ll need help throughout the process. At LemonBrew, we can help you find a real estate agent, apply for a mortgage loan, get title insurance, and more. Contact us today to get started!