A reputed company has prepared a report on the most influential factors that can have a significant effect on the real estate industry this year. According to the facts presented in the report, the market will probably not have many difficulties or go through extremely terrible times. However, there is a lot of uncertainty in the time to come that can play quite a notable role in the situation. Here are the factors which the report claims to be more prominent than the rest.
The Mortgage Rates
The mortgage rates lie at around 4% right now, but by the end of this year, they will have crossed over 5%. This will both be good and bad for those people who are interested in a mortgage loan. Consider history, and they are still favorable because in the past years, they had been over 5.2%. Compare to last year, and that will be a definite rise.
2013 saw a lot of improvements in terms of low rates, reduced home prices and better employment figures. The supply failed to meet this demand, and eventually prices did rise by the end of 2013. With the increase in mortgage rates, the costs associated with home buying also went higher. This year, the rise in prices will continue, but the pace will be slower.
Though it is not likely, but if home prices rise substantially because of higher mortgage rates, you can expect to see affordability products emerge in the market. The requirements will be somewhat less strict and no or low down payments will be allowed.
New Words and New Terms
There are so many formal terms in the real estate industry, about which people are usually not aware of until they have to close the deal. While you may not be aware of FHFA, QM or ATR, they are widely used in the industry, and this year will see more of this because of the new mortgage rules. ATR is Ability to Repay, QM stands for Qualified Mortgages and FHFA is an abbreviation for Federal Financing Housing Agency.
2014 will see a reduced refinance activity because there is hardly anyone who needs it, not until you consider those who want to trade their old higher rate mortgages with new shorter and lower rate loans.
Let us see whether the picture of the real estate market will be painted brighter or the colors will begin to fade in 2014.