The 2019 housing market is expected to experience both significant changes from 2018 and a continuation of, if not an increase in, previous trends.
Whether the former or latter dominate the current and upcoming market, mortgage rates and payments will still be noticeably affected. As always, traditional factors are all still influential in the New Year. These factors include:
- FICO scores.
- Home type or style.
- Loan type.
- Purpose of home.
- Down payment.
Mortgage rates and housing markets fluctuate over time. Some years remain largely steady while others see dramatic shifts based on current events such as natural disasters, changes in foreign markets and even war.
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To know what to expect and how it will affect you and your family, consider the following negative and positive factors that will affect your mortgage payment in 2019.
Negative: Supply and Demand in 2019
2019 is expected to be a challenging year for homebuyers. Market supply and availability is tight, partially due to the large increase of Millennials reaching home buying age. In fact, the National Association of Realtors (N.A.R.) states that 36 percent of current homebuyers are from the Millennial generation. The N.A.R. also states a whopping 65 percent of those Millennials are first-time homebuyers.
2019 realtor predication indicate that:
- More young people will buy homes.
- Fewer homes will be available than in 2018.
- Loans, rates and terms will be geared largely toward one generation of buyers.
This steady surge of first-time homebuyers is happening in tandem with overall mortgage rates gradually, but consistently, climbing higher. Because rates are increasing, so is the inability to refinance or afford a new home.
Additionally, Freddie Mac states the difference between supply and demand from as recent as 2017, came up 370,000 homes short of buyer needs. This means the costs of housing will continue to be unaffordable for many families until the production of new homes is increased to accommodate this surge of new homebuyers.
Positive: How Technology Influences Loans
The use of paper money for major financial transactions is quickly becoming antiquated. Technology is now being used in a positive way to reduce the costs and time it takes to approve and fund a mortgage loan.
Paper files for mortgage loans contain huge amounts of pages, all of which need to be verified and match present loan information and terms. Using an automated digital process for loan approval can exponentially increase the speed of this verification process and reduce costs. That cost reduction can then be transferred to the buyer.
Digital approval systems also benefit lenders. Get repour and trustworthy relationships continue to be the most important factor for buyers choosing a lender. Lenders utilizing more effective technology to expedite the loan-approval process can dedicate more time to building relationships and gaining new customers.
Negative: Rising Mortgage Rates
2018 saw mortgage rates rise by three-fourths of a percent to reach approximately 4.75 percent. Fannie Mae foresees rates in 2019 staying beneath five percent, but most experts predict rates rising above that number. Mortgage Bankers Association (MBA) predicts a slight increase to 5.1 percent, while S&P Global Ratings predicts the mortgage rate will rise dramatically to 8.4 percent.
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Whether a light or dramatic increase takes place, everyone agrees that rates are rising in 2019. Homes will get smaller and affordability will decrease as a result. This will push many potential buyers out of the market and keep them in the renter’s market until rates become more affordable.
Positive: Lending Leniency
In December of 2018 the Federal Housing Financing Agency (FHFA) announced an increase of over $30,000 for the amount at which a loan is considered “jumbo.” A jumbo loan is when the loan amount exceeds the limits of the loan contract. Over a 14-year period the FHFA has only increased the jumbo loan threshold three times, all three being in the last three years.
This threshold is only increased when it needs to match rising housing prices, such as what is occurring in 2019. The FHFA saw a 6.9 percent rise housing prices and adjusted the jumbo loan limit in response.
Also affecting lending practices in 2019 are the rollbacks from the housing market crash over ten years ago. This is because it was more difficult to finance a home then, but it is becoming easier now. The general consensus, which is echoed by the Urban Institute’s Housing Finance Policy Center, is that lending standards need to be more relaxed.
Unfortunately, while it will be easier to acquire a mortgage in 2019, it will be harder to afford it due to the rising rates.
The Fair Isaac Corporation (FICO) has rated credit scores based solely on a user’s payment history. In 2019, FICO is going to unveil something new, called an “UltraFICO” score. Lenders are looking for new customers and ways to relax lending standards and the UltraFICO score was created to answer that call.
The UltraFICO blends bank balances in addition to payment history and is designed to increase credit scores, credit card approval, personal loans and other debt or loan related approval nationwide. This, of course, includes home mortgages, which allows new buyers to qualify for a loan more easily.
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