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7 Housing and Mortgage Trends to Monitor in 2018

2018 is showing some signs that it will be challenging, especially for home buyers. Rising  mortgage rates are likely to reduce affordability.

Check out these 7 trends in housing and mortgage to expect in 2018.

  1. More equity, more HELOCs

As home values rise, homeowners across the country gain equity. That’s why banks expect millions of homeowners to borrow against that equity.

According to a recent TransUnion study, about 1.6 million homeowners are predicted to get new home equity lines of credit in 2018, which is a 16% increase over 2017. TransUnion says 67% of homeowners have enough equity to get HELOCs, and 80% of those borrowers have high credit scores.

TransUnion also forecasts that 10 million homeowners will get HELOCs from 2018 through 2022, which is double the number of new lines of credit in the previous five years.

 

  1. Lenders embracing automation

Many mortgage lenders continue to shift money into automating the loan-application process.

The best-known example is Rocket Mortgage by Quicken Loans. But Quicken isn’t the only lender that embraces automation. Some lenders, such as LoanDepot, crafted up their own automation in-house, while a few other software providers such as Blend and Roostify help large and small banks to automate applications.

There are now a growing number of lenders want to use automation to guide borrowers to loan products that best fit them.

 

  1. Decline in affordability

If, as has been expected, home prices and mortgage rates go up in 2018, homes will, in turn, be less affordable.

For example, if mortgage rates rise to 4.7% toward the end of 2018, and the median price of existing homes rises by 4.1%, then monthly mortgage payments for a typical house would rise substantially.

 

  1. More homes for sale

Some home buyers are finding it difficult to find houses for sale. These shortages are especially obvious for the type of homes that first-time buyers tend to get. Here are the reasons for the tight supply:

Many baby boomers are happy to age in their homes instead of downsizing

Home builders make more profit from expensive houses than entry-level houses, so that’s what they’re constructing the higher end models

But there are some positive signs of hope for 2018: Realtor.com predicts that the housing supply crunch will begin to ease late in 2018.

 

“It looks like we could get to a point where we’re seeing growth in inventory sometime in the fall of 2018,” says Danielle Hale, chief economist for Realtor.com.

 

  1. Mortgage rates creep up

Mortgage rates are expected to climb in 2018. CoreLogic, a data provider for the real estate industry, has averaged six different forecasts of mortgage rates, and the consensus view is that the 30-year fixed will average 4.7% in December 2018. In November 2017, the 30-year, fixed-rate mortgage averaged 4.07%.

 

“Not only are mortgage rates higher, but mortgage rates will be at the highest level since 2011,” Nothaft said at the Urban Institute symposium. “So we’re looking at an environment, going forward, where this era of cheap mortgage rates will largely be behind us.”

 

However, interest rates are known to be resistant to prediction. At the start of 2017, most people expected mortgage rates to climb steadily throughout the year. They did rise —but for a few weeks. The average 30-year fixed hit the top in mid-March 2017 at 4.58%, according to NerdWallet’s daily survey. Then it slipped down slightly below 4% a few times in the summer, before moving upward a bit in the fall.

 

  1. Home prices slow down

After an intense few years, there is good news for first-time home buyers: Home-price appreciation is expected to cool down in 2018.

According to the Federal Housing Finance Agency home prices rose 6.3% in 2016. They’re trending to exceed 6% in 2017 as well. But in 2018, the median forecast among the top six industry and lender groups is for a 4.1% bump in existing home prices across the U.S.

What’s the reason for the slowdown? Home construction is one factor. Economists share that the construction of single-family houses to increase sharply in 2018, based on applications for building permit. The median estimate has single-family housing starts moving up to about 8% in 2018, to an estimated 912,500 new houses

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