April 10th, 2014
Like any investment, homebuyers want to purchase a home with the expert tips on how to make the best buy for their buck.
A report from HousingWire provides such insider advice to give homebuyers some footing at the end of the first quarter of 2014. David Berson, a veteran housing economist, told the real estate news outlet his predictions for the most important trends to watch throughout the year.
Mortgage availability to stay favorable to buyers
Some homebuyers and lenders have been concerned about the new Qualified Mortgage rule, predicting that its implementation would tighten lending standards. As a result, obtaining a home loan would be difficult for many previously eligible consumers. However, Berson noted that the QM rule does not apply to mortgages guaranteed by government-sponsored entities Fannie Mae and Freddie Mac, which guarantee the majority of loans in the U.S.
For this and other reasons, the economist believes that getting a mortgage in 2014 won’t be any harder than previous years and may even be easier. Although the housing boom offered better mortgage availability, the level of activity during that time combined with borrowers who were not yet ready to pay for a home led to the mortgage crisis. He stated the current levels of activity are still on the higher side, but at healthier rates than immediately preceding the housing downturn.
Furthermore, mortgage rates are expected to rise throughout the year, thereby alienating some homebuyers. As lenders see a slowdown in origination activity, they may loosen their lending standards to once again increase business.
Housing activity to pick up throughout 2014
In addition to mortgage activity specifically, Berson foresees housing starts and home sales returning to pre-recession levels.
“Propelling home sales are job growth and housing affordability,” Berson said. “The latter reflects the interplay of household income, mortgage rates and house prices.”
He went on to say that unemployment is expected to decline while employment rates rise. Consequently, demand can be sustained even if affordability drops and mortgage rates incline. Sales have been strong throughout the housing recovery, and continued gains will likely mean that trade-up buyers will have an easier time selling their property in 2014.
“People buy homes when their job and income prospects improve – even if it’s more expensive to do so – rather than buy when it is inexpensive to do so but they’re worried about keeping their jobs,” Berson said.