If you recently decided you are in the market to buy a home, you probably wondered if waiting for the new year is the right time to buy.
As the new year brings a fresh, clean slate in many aspects of life, it also does in real estate.
Which brings us to the question if buying a home in 2018 is a good idea.
Analysts have concluded the forecast for 2018 is looking bright for future homeowners.
Some things are worth the wait, and the predictions in the mortgage market for 2018 explains why it’s an economically smart and conventional idea to invest in a home this upcoming year.
To make sure you qualify for a mortgage you will need to have a decent credit score, proof of income and have not declared bankruptcy in less than 2 years.
What does 2018 look like?
Experts are predicting that 2018 is going to be a good year for real estate. With mortgage rates leveling off and remaining at an all-time low, people are more drawn to the idea of buying a home.
In any year you plan on buying, you will need to pay close attention to home pricing trends, lending costs, mortgage interest rates and your ability to manage payments.
Luckily, if you are in the market to buy a home, recent market trends are revealing that home prices are slowing down just a bit. However, where you plan on living directly affects what homes are selling for, interest rates, property taxes, and borrowing costs.
According to Freddie Mac, the economy is showing a positive correlation between the housing and mortgage markets. Over the past few years, the economy has grown because of the number of jobs available and the ongoing trend of low mortgage interest rates. Analysts believe these conditions will continue throughout 2018.
If analysts predict 2018 to repeat similar economic trends in 2017, what should we expect?
Purchase mortgage volume
First, 2018 is expecting purchase mortgage volume to increase. If home sales are gradually leveling off, more people will be in the market to purchase a home. Therefore, the house price growth will increase, which will affect the number of mortgages purchased.
Unfortunately, the demand for homes for sale will continue to outweigh the supply or quantity of homes available.
Existing home sales are not likely to rise due to the aging population, limited mobility and overall factor of not wanting to relocate.
However, home sales will find its way to grow from either new home sales or construction of single-family homes.
2018’s total home sales forecast looks to jump by 2 percent compared to 2017.
Because of the limited supply of homes available, home prices are predicted to drop. Home appreciation has revealed to be strong over the years, which has sparked an increase in mortgage rates and home prices.
When the market experiences an increase in mortgage rates, it helps reduce home price growth for the following year. Many markets in 2017 have been affected by this trend, which explains why 2018 is predicted to have an average price growth of 4.9 percent.
Refinance activity declines
Throughout the years, the housing market has seen it all. From the recession bubble, to outrageous home sale prices and historic low-interest rates, 2018 may be seeing something new for the first time.
The mortgage market is slowly moving away from a refinancing-dominating market to a purchased market.
Freddie Mac is predicting the share of refinance mortgage activity will drop to 25 percent, which is the lowest the refinance share has been since 1990.
Over the past several years, low mortgage rates have attracted homeowners to refinance their existing mortgage to either shorten their loan’s term or lower their monthly payments.
Since the 2017 summer experienced record low mortgage rates, the need to refinance has decreased.
Mortgage lending companies are concerned for 2018 because of the volume of refinancing could decline drastically. If rates increase, the mortgage industry could experience low levels of activity in refinancing.
Experts have analyzed different sources of refinancing as well. For example, people refinanced their mortgage to shorten their loan’s term, so they can pay off their principal faster. Or refinance their existing FHA mortgage into a conventional loan.
Even if rates remain steady, experts still predict low levels of refinancing.
Home equity appreciation
Existing homeowners benefit from rising home prices because it can help increase their home’s equity. If current homeowners are thinking about making a home improvement or consolidating other debts like credit cards or student loans, can do so by cashing out their home equity.
A cash-out refinance allows borrowers to refinance an existing mortgage into a new one with a higher principal balance while getting cash in hand.
Another solution homeowners could do is take out a second lien on their home, which is usually done through a Home Equity Line of Credit (HELOC).
As home equity is predicted to climb in 2018, experts believe the activity of cash-out refinancing is expected to rise. Especially if mortgage rates remain steady, the total refinances activity rate will be largely derived from cash-out refinances.
Should I buy a home this year?
With all of this information regarding the upcoming year, it suggests that the mortgage and housing market will remain strong enough for shoppers to take the plunge in homeownership.
Mortgage rates are predicted to remain steady, which makes it appealing to prospective homeowners to lock in on a house.
Average rates for 30-year fixed mortgages are predicted to hover around 4 percent. Interest rates have not been this consistent or low for many years. That’s why analysts are encouraging people to do their research and prepare themselves for the biggest investment of their lives.
Experts are suggesting people to take action sooner than later if they are considering buying a home. Waiting any longer in 2018, you could experience an increase in home prices, which could make financing a home a little more difficult.
If you are interested in buying a house this year, you may be in luck! Just do your due diligence, research comparable homes, pay attention to current market trends and talk with several lenders to see where you can get the best mortgage rate.