2017 is a great year for home buyers! According to a report from Ellie Mae–a mortgage origination software firm that handles over 3.5 million mortgage applications a year–home buyers’ purchase mortgage loans in May 2017 accounted for a record high of 68% of all closed loans. This latest statistic is indicative of an upward trend that has lasted over half a decade, with the last two years solidifying the ascent. Home buyers have been representing a growing share of the mortgage market since 2011, and May 2017 is the 26th consecutive month with more home buyers than refinancers as mortgage applicants.
What’s the cause of the current home buying boom? Why is the housing market hot right now? For one, it’s mostly back to pre-2007 industry crash levels of health. Home sales today are at the highest they’ve been in a decade; and in some areas, home prices have even surpassed pre-crash peaks.
Although home prices are continuing to go up–the National Association of Realtors pegged the rise at about 6% in 2016, and it expects the steady increase to continue up to about 4% by the end of 2017–there are still great deals out there due to mortgage rates slowing going up but still being historically low. This provides great value for home buyers, because it is common sense to expect prices and interest rates to be steady for the foreseeable future; and stability of the market seems to be what’s driving potential homeowners to buy and strike while the iron is hot.
How did refinancing fall out of favor? As purchases go up, it makes sense that refinancing goes down. After all, there is very little wiggle room in terms of types of mortgage loans. The shift was dramatic; less than five years ago, refinancing applicants represented 73% of mortgage loans. Fast forward to 2017 and they’re at 32%. Compared to renting, buying a home has always been viewed as a great long-term investment. Combine this with low vacancy rates and high rent fees and even long term renters will think twice and start paying attention to available starter homes around them. In fact, the National Association of Realtors asserts that interest in home buying is the highest it’s ever been since the Great Recession of 2007-2009. With the mid- and post-crash unpredictability of the housing market, there was the risk of buying a home for more than its eventual value once it’s fully paid off.
However, today that is not the case; improvements are incremental, but the market today is solid; which makes the slight uptick in home prices worth the steady appreciation expected of these homes as the years go by.
How easy is it to buy a home in 2017 or 2018? Again, take it from the Ellie Mae Origination Insight Report. Yes, the current housing shortage–the decline has been steady for almost two years now–means that there are fewer homes for sale and home prices are going up. What’s more, competition among potential buyers often results in home sales closing at above asking price. However, Ellie Mae reports that mortgages are easier and faster to get today than they’ve been in years. New low- and no-down payment loans have been introduced. Lenders are more forgiving when it comes to typical loan approvals, too; loosening requirements and reducing hurdles for applicants. Long story short: The odds are in favor of the home buyer.