Economists are positive about the housing market this year. Although there will be quite a few bumps on the road. Still, it is a good news for you if you have been thinking about owning a home.
In the past years, the mortgage have been high especially in 2018 and in the first half of 2019. But in the third and fourth quarter of last year, the mortgage rates started to decline causing a sudden surge in sales and closed 2019 in quite a bang!
In October last year, the Federal Reserve had cut the rates down and we have since seen a boost in the markets. This year, we expect to see the mortgage rates to remain below 4%. The Fed is keen to not make any hike on the rates until there is a sustained inflation increase. While it is clear that the Fed does not have direct control over home loans, mortgage companies surely depend their rates upon the actions of the central bank.
On a global scale, central banks are cutting down rates so it is very unlikely to have a hike in interest rates this year. This is a good news particularly for the renters who have been thinking of moving and acquiring their own homes. With low mortgage rates, more people will be able to afford to buy one.
Trade deal between two economic powers, China and the U.S., will play a big part in the real estate market trends. Should the two powers come up with a substantial deal, the economy could improve considerably. This improvement in the economy may trigger a hike in inflation which in turn will prompt the Federal Reserve to also increase the mortgage rates.
The home builders confidence has reached the record high since 1999 and the housing activities has continued to increase propelled by the low mortgage rates.
Another factor that greatly affects the housing market is different generation players. Millennials are now leading the home buying activities which home builders are responding to by shifting to building more affordable homes rather than expensive properties so that the demand of the millennial age group is met.
The baby boomers on the other hand are either seeking another place to retire or choose to settle in the same space they have lived for years. If they choose to move to another community or downgrade their homes, it would mean a rise in construction works. But if they choose to stay in the same place, this could impact the inventory rates to drop causing a drop in supply in the market.
In huge cities like Los Angeles, more and more companies are actually investing in housing projects so that their workers can afford to get their own homes and stop renting. In this practice, the employees tend to stay longer at their homes as long as they are still in the service with their company. When that happens, the inventory rate in the market will be lesser, while the demand is soaring high.
While low inventory is not a good sign, increase in the home prices and home sales due to low mortgage rates would balance things out. But high home prices could worsen further the decline in supply—especially if the wages stay the same, it will be difficult for people to buy their dream home.
Another thing to consider is the rise of the iBuyers—these are real estate companies who have strong online presence. Take for example Mrs. Property Solutions—they offer to buy homes for cash, buy homes fast, offer cash for houses Los Angeles while potential home sellers do their inquiries in the comforts of their homes.
This is a very convenient platform and appeals really well to millennials who are very tech savvy and rely heavily on the internet pretty much for everything. They want things done in a swift manner, which is exactly what iBuyers like Mrs. Property Solutions do. They buy houses locally, provide fair cash offers, and allow the homeowners to select the closing date for their convenience. It eliminates the possible stress that one encounters when trying to sell a house or in the process of doing one.