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Why Are Mortgage Rates Still Low When Housing Demand Is High?

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Why Are Mortgage Rates Still Low When Housing Demand Is High?

This BLOG On Why Are Mortgage Rates Still Low When Housing Demand Is High Was UPDATED On March 12th, 2019.

Mortgage Rates Are Still Low When Housing Demand Is High. The economy is in full gear. Mortgage Rates still at historical lows and many wonder when mortgage rates will be going up.

  • The real estate market crash of 2008 hit everyone in the United States from left field
  • Never in history has real estate values dropped throughout the country as it has
  • The 2008 real estate and credit collapse affected every American household
  • Whether they were upper class, upper middle class, middle class, lower class, white collar workers, blue collar workers, retired folks, and self-employed workers, the Great Recession devastated many American Families financially
  • Bankruptcy and foreclosures rates have skyrocketed
  • Never have bankruptcy and foreclosure rates have been as high as in 2008 and even to this day
  • The economy has yet not recovered fully
  • Even though job numbers have improved, many economists are questioning those numbers
  • Many have dropped out of the workforce altogether and have given up looking for jobs
  • Entire industries such as the real estate industry, construction industries, and mortgage industries have lost hundreds of thousands of workers and had to go through a major overhaul

Rebound Of The American Economy

Since President Donald Trump took office in January 2017, the American Economy has been at work in a great way. The Dow Jones Industrial Average has hit historical highs five times.

  • There does not seem to have any signs of a market correction
  • Housing prices have escalated and are appreciating in all parts of the country
  • Both the FHFA and FHA have increased loan limits due to rising home prices
  • There is more demand for housing than there are homes
  • Home Builders are having historical revenues and selling homes like hotcakes
  • This is has been a long journey to recovery since the Great Recession of 2008
  • Many economists believe was the longest recession in the history of the United States and possibly the world
  • Many believe that Barack Obama did more damage than good
  • Obama will probably go down in history as the worst American President 

Where Are Mortgage Rates Headed In 2019?

Due to the slow economic recovery, mortgage rates have been at historical lows since 2008 with no major increases

  • Half of the mortgage companies have closed their doors and the whole sub prime mortgage market have become extinct
  • Due to the lack of economic recovery, mortgage rates have been at record lows since 2009
  • But as everyone knows, mortgage rates cannot remain this low forever
  • The Federal Reserve Board has announced that they are planning on raising mortgage rates the second half of this year
  • Many real estate and mortgage industry experts agree that 2018 will be the year where mortgage rates will finally start spiking up
  • Talks of mortgage rates increasing have been around for the past couple of years but still remained low.

Mortgage Rates May Be Headed Higher

Mortgage rates have been extremely volatile in the past several weeks.

  • The stock market does not know which direction to go with triple-digit market swings
  • There are still millions of homeowners who can benefit from today’s mortgage rates before mortgage rates start to spike up in the second half of 2018
  • Mortgage rates are still at a two year low and millions of homeowners who are sitting in the sidelines should consider shopping for a refinance mortgage loan

Comparison Of Rates On May 2018 And Rates Now

Homeowners who were trying to refinance prior to May 2018 but could not due to mortgage rates skyrocketing have a second chance this year.

  • Nobody has a crystal ball on whether or not mortgage rates will go up starting the second half of 2019
  • But all market indicators point to that direction, especially the Federal Reserve Board announcing that they are planning on increasing rates
  • The Federal Reserve Board can always change their minds
  • Back in May 2018, mortgage rates jumped over 1.0% literally overnight where millions of homeowners lost their chance of refinancing their home loans because they did not lock the rates
  • Many just waited month after month for mortgage rate corrections but it never got low enough for them to get a net tangible benefit

With Mortgage Rates Still At Historical Lows, Great Time To Purchase Home

The home buyers market is still expected to remain strong even with higher mortgage rates in 2019.

  • FHA reduced the annual FHA mortgage insurance premium from 1.35% to 0.85% a few years back which significantly spiked home sales
  • The reincarnation of the 3% down payment conventional loan program, the home purchase market is not to be affected by mortgage rates increasing in 2019

What Industry Experts Say

Massimo Ressa, Chief Executive Officer at Gustan Cho Associates at Loan Cabin Inc. issued the following statement:

Mortgage rates can be difficult to pin down with precision, but all experts, including myself, agree on one thing: Rates will stay north of 5 percent throughout 2019. The Mortgage Bankers Association forecasts the average 30-year fixed mortgage will hold at 5.1 percent for most of the year. As a result, mortgage origination volume will stay flat compared with 2018 at roughly $1.63 trillion. In my opinion, I feel rates will move even higher. The average 30-year will stay at 5.3 percent throughout much of the year, reaching 5.5 percent by the end of 2019. Slower economic growth in 2019 could temper major rate swings. Unless inflation picks up, rates and home sales will stabilize in the new year as GDP growth slows to 2.3 percent, down from 3.1 percent in 2018. The economy will slow further to 1.6 percent growth in 2020. If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market. With higher rates, your borrowing costs will go up. To get the most competitive rate offers possible, boost your credit score and make a larger down payment. You may need to lower your price point to stay within budget — and that means adjusting your expectations of the type of home you can reasonably afford. Contact us at Gustan Cho Associates at Loan Cabin Inc. at 262-716-8151 or text us for faster response if you have any further questions. As CEO at Loan Cabin, I am different than others because I am always accessible.

Home Buyers who need to qualify for a mortgage with a direct lender with no overlays on government and conventional loans can contact us at any time at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

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