Mortgage Trends To Watch Out For in 2019

Written by: April Lunar
06/14/2019

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2019 is already halfway, and so far things have been tough for home buyers around the world. The demand for homes is more than supply, mortgages have already started going up. In this list, we outline the top mortgage trends that you should watch out for in 2019.

However, since the year is still young, we hope the remaining half will bring a lot of developments for mortgage borrowers and buyers alike. Developers are erecting more entry-level homes while lenders are easing things up and now even first time home buyers can access funding. 

Here are some more trends to keep an eye on in 2019.

Interest Rates are Expected to Rise Towards the End of The Year

The Federal Reserve said its seeing to it that interest raise increase in 2019 but no one knows if these adjustments are will affect mortgage rates. 

At the moment, the 30- year fixed-rate mortgage is approximately 4.6%. If this rate increases even by 0.4%, the number of potential homebuyers will be reduced, because of low purchasing power.

The Primary Focus is on First-Time Buyers

The real estate and the mortgage industry are now focused on first time home buyers. Prior to the home crisis, most first time home buyers applied for about 40 percent of purchase mortgages. In 2019, the figures have risen to 60 percent. 

The mortgage market is completely dominated by the first-timers, at least for the last decade and continue to lead the pack. In fact, home sales have increased exponentially in the last three years, 80% of which comes from first-time buyers. 

These individuals represent years of demand. According to stats, there were roughly three million first-time buyers who delayed to buy homes between 2007 and 2015. Most of these people still want to purchase homes for themselves and their families. 

Newly Built Homes are Much Smaller

Many markets are still demanding for homes for sale and they need to be pocket-friendly. The research found that most first-time home buyers prefer starter homes and not forever homes because they are a bit cheaper. Now, more and more home builders are erecting smaller and affordable houses. 

According to Robert Dietz of the National Association of Home Builders, single-family home sizes reduced in number in 2018. In fact, the number has been reducing for the last three years because of the introduction of entry-level home construction. 

The median size of single-family homes began in the second last quarter of 2018 was 2321 sq.ft, as reported by the US Census Bureau. That is 5 percent smaller than the size of new homes 36 months earlier, which was 2440sq.ft. 

Builders are now focusing on Navy Federal members because they look for homes that cost less than $300,000- they like to purchase new homes. For a long time, builders used to construct buildings with a sale value of $500,000 and more because the margins were great. 

However, the builders have realized that there is dire demand for a lower-priced market that they can provide for people and new construction, and there has been a lot of growth there. 

After several years, the median price for new properties started to fall in the spring of 2018. In October 2018, the median price for new homes was 3.1 percent lower than the median price of a new home one year earlier. However, things are set to change in 2019, as the prices are projected to rise towards the end of the year. 

Affordability is a Major Worry

Aa mortgage rates and prices of homes continue to rise, homebuyers find it more difficult to afford homes, especially in areas that have a lower inventory of property sale. It is also in these places that home prices rise faster because the demand for homes is more than the supply.

According to statistics, however, a slow rise in mortgage rates will not negatively affect homebuyers’ desire to own homes. For instance, an increase of 0.5% on a home that is worth $300,000, will affect the payment by about $125 per month, which is not noticeable. As such, it is less likely to affect a buyer’s purchasing decision. 

Apparently, different markets have reached a point where a standard price is bumping up against the ability to afford a home. Industry analysts, however, believe that in 2019 prices will fall back and be at par with incomes. Also, people expect big sales in different areas such as Tennessee, Chattanooga, Oklahoma, Tulsa, Texas, and El Paso. 

Millennials are Expected to Purchase the Most Properties

According to a study done by the National Association of Realtors in 2018, 37% of those who bought homes were millennials. There is no doubt that in 2019, this group of homebuyers will continue to acquire more properties. 

As we get into 2020, it is expected that millennials will invest more in the real estate market share. 2020 will definitely be an incredible year because the largest percentage of millennials will turn the age of 30. 

More Home Borrowers Opt for ARMs

When fix rates for mortgages increase, more and more borrowers will choose ARM. ARM stands for Adjustable Rate Mortgages. Because it happened last year, it is expected to continue throughout 2019.

Borrowers prefer ARMs since the initial rates on ARM are much lower as compared to fixed-rate mortgages. As a result, borrowers only need to pay low monthly payments in the first phases. ARM borrowers usually assume monthly payments could increase when the rate adjustment seasons commence. 

Choosing an ARM could be an ideal strategy for those who do not wish to over delay the initial interest rate. For example, a 3/1 ARM attracts a lower initial interest that is valid for three years and then re-adjusted per year. On the other hand, if you have 5/1 ARM, for instance, is gambling they will sell or refinance the home in a span of five years or before the rate is changed upward. 

The mortgage industry keeps changing every day, and so, it is important to stay updated with the latest trends. 


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