1. Are we in another housing bubble?
Lack of available homes is spiking the bubble conversation. Housing supply is not keeping up with demand, measured by population growth. The same trends are happening in mountain communities. Here are some statistics for Summit County.
Over a million and a half new construction completed in the US from 2003-2005 after the housing crash, haven’t hit the average after 13 straight years. The numbers do not support the housing crash in 2008, it feels more like 2006.
Many people decided not to sell their homes last year. More inventory will come on the market as people feel safer about health concerns and consumer confidence continues to go up.
2. How high will mortgage rates go up?
Mortgage rates remain historically low. We are up compared to the prediction. Still, a very attractive interest rate environment is predicted.
In the final days of the previous administration, Treasury and the FHFA amended the terms of Fannie and Freddie's bailout agreement in such a way as to limit the number of certain types of loans that could be acquired. This week, Fannie Mae finally formalized the announcement and began contacting lenders that had too many 2nd/Investment loans on their books.
The result? Several lenders immediately jacked up rates/fees on these loans--some by huge amounts (like 5+ points, or $20k on a $400k loan). Those who didn't respond immediately are expected to follow suit in the near future, even if not all of them will be as severe as the early adopters.
“As the economy improves given labor market optimism, continued vaccination roll-out, and additional stimulus spending, mortgage interest rates increased this week,” says Sam Khater, Freddie Mac’s chief economist. “But even as rates rise modestly, the housing market remains healthy on the cusp of spring home-buying season. Homebuyer demand is strong and, for homeowners who have not refinanced but are looking to do so, they have not yet lost the opportunity.”
3. How will the economy and unemployment affect home prices?
"The economy is expected to add seven million jobs this year," says Gregory Daco, Oxford Economics, "while the unemployment rate falls below 5% by year-end."
Although prices will continue to go up in Summit County for the near term, over the long term we are reaching a tipping point where the prices themselves are the limiting factor of future demand.