Written by: Tripp Butler, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
With peak buying season upon us, here's what analysts are expecting to see this year:
Increasing mortgage rates
Inventories could increase
Millennial movement
Growing online trends
Private mortgage insurance explained
Increasing Mortgage Rates
It appears, depending on how the economic recovery progresses, that mortgage rates could continue to increase. Earlier in the year, rates were holding under 3%, but those rates have steadily increased over several weeks. As more and more Americans are vaccinated, it's expected that economic recovery will continue, which will likely contribute to an upward movement in mortgage rates. If you're thinking of buying this summer, it may be in your best interest to lock in a rate as soon as possible.
Inventories Could Increase
Many home shoppers found the lack of inventory to be a major source of frustration during the past year. It was difficult - if not impossible - to find available properties, and when something went on the market, it was often scooped up in days or sometimes just hours. Some analysts are expecting to see increased inventory this year. As more people become vaccinated and a general sense of stability returns, home sellers who were deterred from making a move in 2020 will be more likely to list their properties.
Millennial Movement
Another trend that could continue influencing the real estate market this spring and beyond is an increase in millennial buyers. Nearly five million millennials are set to turn 30 this year, and they now comprise the biggest segment of home buyers. In 2018, millennial homeownership was at record lows, but there's evidence that is changing. Around 86% of younger millennials and 52% of older ones are buying their first homes, and some are buying luxury properties that are well beyond what you'd consider a starter home. Millennials will likely drive the market throughout 2021. A survey from the National Association of Home Builders in the fourth quarter of 2020 found that 27% of millennial respondents planned to buy a home in the next 12 months, up from 19% the year before.
Growing Online Trends
Online real estate services grew in functionality and popularity this past year. 3D home tours, virtual agent/broker teleconferencing, and online closings aided by tools like DocuSign are all ways that technology is facilitating a simpler home selling or buying experience. Regardless of the pandemic state, the convenience afforded by online real estate technology is here to stay.
Private Mortgage Insurance Explained
When a lender looks at a loan application,
their main question is, "what risk do I take
by issuing this loan?" Credit checks,
bank statements, employment verification
– all the documentation required when
getting approved for a loan is in service
of assessing what the odds are that the
the loan will go into default. This is why a down payment is such a crucial part of obtaining a home loan. When a borrower has a substantial down payment (20 to 30% or more), the lender's exposure is lessened in the event of a default. This 20-30% figure used to be required,
yet clearly, this kept a lot of people from
realizing the benefits of homeownership,
especially first-time buyers. That is until
1957, when Max H. Karl, a real estate
attorney founded Mortgage Guaranty Insurance Corporation and invented the modern form of private mortgage insurance. PMI is designed to address the hefty down payment hurdle. Instead of coming to the table with 20% or more for a down payment, a private mortgage insurance policy allows consumers to buy and finance a home without a large down payment. With PMI, the borrower pays a small percentage of the total loan amount (0.3 - 1.5%/year) in addition to their mortgage and insurance payments. For example, a $200,000 loan with a PMI rate of 1% will come out to $167 extra a month for a borrower. It's not anything, but for many, it's a manageable trade-off. Yet sometimes PMI can get a bad rap as something to be avoided at all costs. Until the end of the '90s, this attitude was understandable – homeowners had limited resources to cancel PMI and were often stuck with it for the life of their loan. That changed with the Homeowners Protection Act of 1998. It required automatic termination of PMI when the loan balance reaches 78% of the original value through natural amortization. Borrowers can often drop their PMI even before reaching that 78% figure – once a borrower reaches 20% equity in their home, they can request a cancellation of PMI. As home prices continue to rise, borrowers build up equity in their homes faster, meaning they can often drop PMI payments earlier than they think.
If you're curious about buying a home for the first time, or you're wondering how the value of your home has changed over time, reach out to me. I have up-to-date market information to help you make decisions with confidence.
Questions? Visit trippbutler.homepages.com or contact Tripp at (912) 856-8685/ (912) 651-5400. You can also send an email at tbutler@southbridgesav.com. If you have a brokerage relationship with another agency, this is not intended as a solicitation. All information is deemed reliable but not guaranteed.
Tripp Butler, Executive Contributor Brainz Magazine
Tripp Butler has almost 30 years of experience in the residential real estate market. His expertise is taking over real estate companies that are underperforming and increasing not only the growth but the profits by threefold. Tripp started his career at Wild Dunes Real Estate in 1993 as a sales executive, by 1998, Tripp was a Broker and partner of the firm. At the end of 2005, Tripp sold the Company to Lowes Management which was the 5th largest resort management Company in the Country. In 2008 Tripp purchased Southbridge Greater Savannah Realty and had made this Real Estate Company one of the premier real estate companies in the surrounding area. Southbridge Greater Savannah Realty handles the relocation work for some of the biggest companies in the Southeast.
