All of the data that’s coming in points to a very strong V-shaped recovery as it relates to the housing market. This is based upon the Fannie Mae forecast that was recently published.
Clearly, the low-interest-rate mortgage environment that’s created an accelerated boom within the housing market. Fannie Mae reported that mortgage lending this year is projected to reach an all-time high of $3.9 trillion. This breaks wall other records on the books. Of that $3.9 trillion, $2.4 trillion came in the form of refinancing. This is the highest level of refinances since 2003 and double that seen in 2019.
The low-interest-rate market, which was precipitated by the Fed’s decision to lower interest rates, is clearly having a profound impact upon the number of homes being bought and sold and the number of refinancings. Fannie Mae is forecasting that at the current interest rate of 2.86%, they estimate that nearly 69% of first-lien loan balances have at least a half a percentage point incentive to refinance.
According to the Fannie Mae forecast, this low-interest-rate environment will accelerate the number of new home sales to 770,000 in 2020. This represents an increase of 14% over 2019.
Existing home sales will not reflect the kind of buyer demand that’s out there, due to the fact that inventory has been falling precipitously over the last three years. According to Fannie Mae, sales of existing homes are expected to hit 5.3 million, which is actually lower than 2019. But the decrease is clearly the net effect of the pandemic upon the market where for the months of March, April and May, many home buying activities were put on hold.
Fannie Mae is also expecting that the interest rate for a 30-year fixed mortgage will continue to fall and will come in at 3.1% for 2020 and 2.7% for 2021. This is by far the most significant decrease in mortgage rates ever offered on record. Compare this to 1981 to ’83 when interest rates were burgeoning at 18% per year.
There is concern that the liquidity within the mortgage market will create a similar bubble to what occurred back in 2006-2008, creating the Great Recession. The only thing that is holding back a potential real estate bubble is the incredible shortage of available homes for sale, where on the national average there is less than 3 months supply available.
According to the National Association of Realtors, which reported on August 21st, that seasonally adjusted existing-home sales surged by 25% in July representing the biggest monthly gain ever recorded. This Record beat the prior record reported only the month before which was set in June up 21%.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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