Real Estate

5 Ways The Pandemic Mortgage Boom Has Changed The Market

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Although the beginning of the pandemic saw a slow down in sales activity, rock-bottom mortgage rates spurred an über-competitive homebuying season and record levels of refinancing activity. However, mortgage rates are on the rise again, with 30-year fixed mortgage rates finally rising above three percent earlier this March.

Bank of America Consumer Lending Executive Ann Thompson and Head of Sales Christian Wallace gave the Connect Now crowd a review on 2020’s mortgage market along with a few insights about generational buying trends, home affordability, and which cities are benefitting from ‘the great reshuffling.’

Here’s what they said:

Refinancing activity will slow down

Thompson said refinancing activity will slow by the third quarter of 2021, as average mortgage rates reach 3.3 percent. However, she said, there are 20 million Americans who have mortgage rates above 4 percent and will take advantage of current rates although they’re above 2020’s historical lows.

“So [refinancing activity] should slow somewhat, but refinancing isn’t just about rates,” she said. “It’s also about people reassessing their living space and potentially pulling money out to improve their space where they’ve been spending a lot more time at home and potentially improving their property for sale as well.”

“So it’s not just about a lower rate, but it’s about clients’ other hopes and dreams,” she added.

The focus on affordable housing will be greater than ever

Although the pandemic provided plenty of opportunities for homebuyers and homeowners, it also pushed millions of Americans to the brink of financial ruin with concerns about a wave of evictions and foreclosures. Lawmakers and economists are concerned too, with both groups warning current home price trends could “choke-off” a whole generation of buyers.

Thompson said Bank of America has its eyes on the affordable housing market and is expanding its down payment assistance programs to help buyers surmount one of the main financial barriers to homeownership.

“Given the economic hardships, we’ve really seen a strong focus on affordable homeownership because that’s really top of mind to assist those first-time homebuyers and those low to moderate-income families in those communities as well,” she said. “We expanded our downpayment grant program and really saw a lot more interest in it.”

As the market stabilizes, Thompson said, lenders are relaxing their borrowing standards, which will provide more opportunities for lower-income Americans to purchase or refinance.

Secondary markets will continue to rule the day

The pandemic and the ensuing change to our living and working routines spurred what experts have come to call “the great reshuffling,” or the move from coastal hubs to nearby or far-flung suburbs. Wallace said that shift will continue well past the pandemic and begin impacting lesser-known cities and small towns as buyers keep looking for a place with the perfect mix of amenities and affordability.

“I’ll use Austin as a really good example,” she said. “You know, the cost of living in Austin has started to go up [as] it was kind of a real popular market in 2020.”

“Now you’re looking in 2021, you’re starting to see San Antonio starting to be that kind of a city,” she added. “Some of the smaller areas are gaining attention.”

Wallace said this migration shift could spur the revitalization of smaller cities that are trying to attract millennials and other young professionals.

“I would love it personally if it was kind of a revamp and revitalization for even smaller cities or even towns that can become cities again,” she explained. “Now that everybody’s working from home and making some adjustments, maybe we can see some of that regeneration come through. I think will be really kind of fun.”

Millennials still want to become homeowners

Although millennials have become less sure about their ability to become homeowners due to student loans, booming home price growth and other financial barriers, Wallace said it doesn’t mean millennials have given up altogether.

“Previously, there was a lot of talk in regards to millennials not wanting to buy — they wanted to be able to up and go [and] they wanted that freedom and the luxury to be able to move,” she said. “But I think through last year they all realized, ‘Okay, that’s all great, but I need to build my own roots [and] I want my own house.”

Thompson agreed and said a recent homebuyer survey found that 89 percent of millennials “are motivated to buy” as rent growth accelerates. Furthermore, she said this spring may provide an opportunity for millennials to enter the market as more sellers make the decision to list their homes.

“I think what’s holding us back a little bit is you know, inventory and hopefully what we’ll see as we go into spring is that inventory kind of opening up,” she said. “I do think the environment is great for [sellers who] really felt restricted [but wanted] to sell their home.”

Technology will continue to drive digital mortgage experiences

Wallace and Thompson said digital mortgage transactions will be here to stay, especially as consumers become more comfortable with the process and experience.

“I think that you’re going to see even more technology come into the whole homeownership journey,” Wallace said.”I think it’s going to be something that’s going to be exciting as we go through 2021 and 2022 — not just because of COVID.”

“I think the speed is going to be something that’s going to be continued, and it’s also the ease — I mean how great is it to sit in your living room and you’re filling out your application for your mortgage online, you’re able to get your docs online, you’re no longer having to go get into your filing cabinet and go pull all the documents [and] you’re able to do everything right there,” she added.

Both women said the move toward digital is great for real estate professionals and provides the opportunity for them to lead consumers through the experience.

“I don’t think there’s a client on the planet that wants to sit with us for two-and-a-half hours getting data that we can get very easily,” Thompson said. “I think they’d rather talk about rates, terms, potentially downpayment grants, and other relevant guidance.”

Email Marian McPherson

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