As the year reaches a close, market experts are continuing to reflect on industry data and make their best predictions for 2022.
Many experts agree that three trends will continue into the start of the new year: Home prices will remain high, inventory will remain low, and mortgage rates will continue to rise.
While many believe the housing market will be in a more balanced place by the end of 2022 as more homes are built to accommodate heavy demand, those homes will take time to be built.
Initially, experts thought that mortgage rates would be high enough to squash the number of refinances. However, many now have revised this prediction.
With inventory expected to remain low and home prices remaining high, experts believe homeowners will turn to sprucing up their current space rather than seeking a new one.
With a cash-out refinance, homeowners can tap into home equity by replacing their current mortgage with a new, larger one.
Once the difference is paid in cash, homeowners are free to use the funds on any home improvement projects. This might include anything from new appliances to added square footage.
Experts also expect lenders to begin more widely offering home equity lines of credit (HELOCs). With a HELOC, a homeowner won’t be giving up their current mortgage rate to access their equity.
If they have a great current rate, and rates are continuing to rise, they may opt to tap into equity with a HELOC instead of refinancing and getting stuck with a new, higher rate.
HELOCs are secured loans that allow homeowners to borrow against the equity in their homes. Lenders give borrowers a draw period to designate the term, and once this period is over the repayment period begins.
HELOCs are similar to credit cards in that a borrower takes out funds and repays them to replenish the credit line.
Experts advise lenders to be aware of how borrowers are planning to use the money, because similar market conditions led up to the Great Recession.
Eventually, experts expect to see home prices level out because buyers simply can’t afford the homes. As increasing prices push buyers away, homes will begin to stay on the market longer.
As refinance activity also steadies over time, lenders are expected to pick up other types of products to fill in for this loss. This may result in more non-qualified mortgage (non-QM) loan types.
Industry experts acknowledge that all predictions are dependent on multiple factors that can’t be accurately predicted, including new Covid variants and the effects on the economy.
For the most accurate information on a homeowner’s unique situation, experts point to consulting with a mortgage lender to determine the most personalized course of action — no matter what other economic factors are at play.
Photo by Expect Best from Pexels