What to Expect and Look forward to in 2014
2013 was an awesome year in the real estate industry. We're finally starting to bounce back from the recession and there are more homes selling with a higher profit than in the last five years. Interest rates have been historically low over the last few years though refinancing options and first-time homebuyers have jumped at the chance at getting a great deal on either their first loan or on a refinance. But in the future, we are going to be seeing those interest rates increasing. Here are five things to expect in the real estate industry in 2014.
- Mortgage rates will go up. We're expecting a 5% or more for a fixed rate mortgages. Currently were still under the 5% mark but the way things are going is a good indication that we will probably be at 5.5% by the end of 2014. According to a lot of economists, inflation will become the drivers of rates and there are some reasons to believe that economic growth will be reliably stronger in 2014 then it was in 2013. This will also add to the increase in interest rates.
- Fannie Mae and Freddie Mac will probably not reform in 2014. Because these two federally backed corporations borrowed nearly $180 billion to keep afloat as the housing and financial crisis unfolded, it will be unlikely that they will be able to pay off everything allowing for a reformation of the system. So what is that mean for home buyers? Things will probably be status quo when applying for a mortgage to Fannie Mae or Freddie Mac the qualifying factors and ability to repay will be a little more stringent.
- Mortgage changes when it comes to the Dodd-Frank act. The new term "ability to repay" and "qualified mortgages" are two of the newest terms and rules put into place in 2014. These new regulations will require that no more than 43% of your income goes towards debt each month, you will need more documents to prove your income and long obligations, and your credit history needs to be higher than it used to. FHA loan limits in high-cost areas also have dropped and lenders are not allowed to make loans on terms longer than 30 years, terms with interest-only payments, negative amortization, and balloon payment.
- Refinances probably will be all but a distant memory. Unless the HARP 3.0 becomes available, refinancing activity will probably remain somewhat low. Most of those that have wanted to refinance probably have already done so. With the rates increasing and tight underwriting standards that require deep equity positions, there will probably be very few refinances in 2014.
- The market and interest rates are stabilizing. 2013 was the return of a competitive real estate market and the demand was driven by low mortgage rates and low home prices. Over the course of 2013, we see interest rates and home prices increased by not let him really out of proportion. Will probably continue to see home prices as well as the interest rates, as said before, slowly increase and natural and gradual rates. This is what keeps things stabilized and keeps our entire economy afloat.
2014 is set to be a really exciting year in the real estate industry. It's a good time to buy, sell and invest but probably not the best option to refinance unless you can go at least 1% lower than you have now.
Guest Post by Columbus Real Estate Professional, Don Payne