What does the new year hold for housing? Bankrate shares what they expect to be the five major housing trends in 2021. Based on housing experts who spoke at a virtual conference of the National Association of Real Estate Editors, mortgage rates will rise from record lows, home-price gains will slow, and Americans will continue their migration to less dense regions and lower-cost housing markets.
The National Association of Realtors expects mortgage rates to average 3.1 percent in 2021, up from 3 percent in 2020. The Mortgage Bankers Association says rates will average 3.3 percent in 2021. (My note: The ten-year treasury is the basis for the mortgage rates. It is currently just under 1%. A breakout above that level could quickly usher in 2% and higher mortgage rates.)
This year, home values have soared due to rock-bottom mortgage rates, limited supply of homes for sale, and strong demand.
“People are moving from high-cost markets like California,” says Frank Nothaft, chief economist at real estate data firm CoreLogic.
Many buyers are looking for bigger homes with home offices, home gyms, and spacious yards, with Americans spending more time at home.
“Even people who were very content with their home before the pandemic, now some of them are saying, ‘My home is too small,’” Yun says.
Lawrence Yun, the chief economist at the National Association of Realtors, says. “It will not cause foreclosure problems.”
Yun says struggling homeowners will be able to sell their way out of trouble. While some homeowners will default, and the foreclosure numbers will increase, most will sell before foreclosure. (According to the Housing Wire, “The FHA announced on Monday borrowers now have even longer to request deferred payments after extending the deadline for initial forbearance requests for FHA-backed mortgages to Feb. 28, 2021. With the six-month grace period, plus a possible six-month extension, some FHA borrowers may be in forbearance into Feb. 2022.”)
VA loans once were an afterthought, making up just 2 percent of overall loan volume. VA loans now are about 10 percent of the mortgage market. Chris Birk, director of education at Veterans United Home Loans, says, ”VA loans have mostly shed the perception that they were “inferior” to other types of mortgages. This was a truly historical year, the biggest year in the history of VA lending.”
VA loan volume nearly doubled from 2019 to 2020. It was the first time the VA has issued more than 1 million loans in a year.
“Younger veterans are driving demand,” Birk says. “VA loans require no down payment and have loose requirements around credit scores, allowing veterans to accelerate their home-buying schedules.”
“They don’t need to spend years saving a down payment. They don’t need to build pristine credit,” Birk says. “They’re able to jump into the housing market well ahead of their civilian counterparts.” (When was the last time we saw no downs and looser credit?)
Several of those predictions could turn out to be very wrong. These experts are ignoring signs of high inflation ahead. If you look at the money supply since COVID hit us, it has been soaring. The government has gone on a spending binge, and the country is borrowing at least two trillion a year. There seems no end to plans to spend money the FED prints out of thin air. Already we see food shortages (in San Antonio recently, ten thousand cars lined up for free food), and food prices are inflating. The basics of building and raw materials such as copper, lumber, and oil are rising. How will the FED keep interest rates this low? Other indicators of coming inflation, gold, silver, and Bitcoin. are forecasting higher prices.
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