Four Predictions about Mortgage Industry in 2019

Research studies conducted by reputed financial institutions have forecasted 2019 to be a tough year for the mortgage industry. However, simpler loan fulfillment programs coupled with affable customer service may be able to drive it towards higher revenues.

An upsurge in the mortgage rates may no longer be a surprise, but the ‘30-year mortgage’ rate may fluctuate more sharply before elections in 2020. However, few impending aspects could well take the mortgage industry by surprise. Nonetheless, discussed below are some of the more plausible predictions in 2019, which may have a significant impact on all stakeholders.

Price Escalation Could Continue

New homebuyers may have to wait a bit longer to purchase their dream homes as prices are expected to go up further. A surge in demand for luxury homes such as mansions and villas is expected to peak in the first half of the year, and the limited inventory could become dearer. Also, with the focus shifting to affordable living, the prices for budget houses could even out after first quarter, though the demand for micro homes shows no signs of relenting. It means the first time home buyers would have to be quick in making purchase decisions whenever a good deal comes across.

The unbalanced scenario can be attributed to the decline in the housing inventory, and as demand outpaces supply, the surge in prices would mean a further squeeze on borrowers. However, it could all change if the housing inventory is given a boost by the concerned authorities and is backed by adequate government intervention.

Reformations of Federal Guidelines

The Federal Home Loan Mortgage Corporation (also known as Freddie Mac) and Federal National Mortgage Association (Fannie Mae) are government-sponsored enterprises that have played a vital role in the US mortgage industry since their inception. The new administration is now planning to restructure these two critical enterprises and could well have them privatized.

Though the assessment of the implications may require further details, the predictions indicate a potential rise in the debt-to-income ratio. As this metric links the amount of debt to the borrower’s income level and other liabilities, it means that individuals who are already in a huge debt might find it difficult to get a loan. Such as scenario can be avoided if the government can protect the interest of the low-income borrowers during the restructuring process.

Demand could keep rising

The continued increase in infrastructure and defense spending could potentially boost the wages in the months to come. This means, on contrary to the earlier sense of caution that now seems to subside, a pro-bank economic scenario should be a boost for the realty sector. If the rates are kept under control by the governing bodies, the lending institutions would surely do their bit to make the home buying a pleasant experience for all types of borrowers. In addition, customer-centric offers coupled with reliable service could motivate new home buyers, which could keep the demand up and rolling.

High Prices Could Boost Inventory

Continuous thrust in interest rates is a scenario that forces the buyers to backtrack on their decision. As the hike in payments reaches agonizing levels, the homeowners do not often wait for best offers to sell off their estate. Such a spree in property disposals can boost the housing inventory, which then acts as a deterrent to the further hike in prices.

In the current scenario, as the interest rates continue to rise and with the wages not being able to catch up, such as correction can be predicted in 2019. These indications should prevent homeowners from selling their property in haste, as they could end up paying exaggerated prices for their next home, only to see the prices drop after the purchase.

All these trends point to a gripping environment as far as the mortgage industry is concerned. However, if the impending innovations that can revamp the housing sector get implemented with diligence, 2019 could witness the mortgage industry succeed even with the escalating rates and home prices.