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Effects of a Hot Housing Market on the Mortgage Market

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When you look at our national housing climate, the market has been hot, hot, hot, and this affects the mortgage market. How? Let’s break it down.

urban setting for boom in housing marketBoom in housing market

You may have noticed a lot more activity in new home construction happening these days. That’s because the real estate market has seen a change in lending practices that have increased equity for homeowners.

In fact, according to U.S. Census Bureau, new home sales are up over 12 percent and existing home sales are up almost 6 percent, as reported by the National Association of Realtors.

Business is booming.

Changing interest rates

What got us here? Let’s look at interest rates. If you remember, interest rates were at an all-time low not too long ago. On the heels of the burst housing bubble in the mid-2000s, we saw a recession. All interest rates decreased as a result in order to help the floundering economy. All-time low rates ensued.

This year, we’re seeing the trickle effect of the election and the fact that President Trump promised an increase of billions of dollars in infrastructure spending. The result: investors are driving up the cost of goods and inflation. As a result, the bond market and mortgage rates are on the rise.

What about home values?

Home values are on the rise, slowly but surely, and aligned with what we expect to see as far as trends. Although we’ve been all over the place the past decade, with our share of lows, we expect to see a shift to a normal growth rate coming in the real estate market.

The key take away

The real estate market will continue to enjoy and feed off of looser lending standards, increased equity and home values, and historically low mortgage rates. Lots of building translates into higher costs of construction and larger mortgages.

Contact Golden Oak Lending today to learn more about how today’s housing market has an impact on your current or future mortgage.

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