The present condition of the economy continues to propel real estate and mortgage activity. While interest rates remain low, lenders are seeing an increase in home purchase transactions, however refinance activity is declining. Historically, as interest rates decline refinance transactions increase, and as rates increase refinance activity declines. With rates projected to increase over the next few years, lenders are forecasting a significant decline in refinance activity.
2014 brought about the initial change from a heavy refi market to a renewed onset of resale home purchases. A market previously stifled by a troubled economy with home values reaching all time lows, is now shifting from a refi-dominated market to a purchase-dominated market. Many homeowners who were forced into rental situations during the recession have now recovered income and credit status enabling their ability to purchase. Likewise many who refinanced their homes 5-8 years ago when declining home values left them unable to sell, are now selling those homes and either buying up or downsizing, creating more purchase activity for lenders.
Resale inventory is still relatively low, but those who see the value in this trend are eager to get their home on the market while competition is at a minimum. But it won’t take long before others realize the opportunity that currently exists for sellers. Home builders are certainly jumping on the chance to seize every bit of this opportunity as more buyers become ready, willing and able to purchase homes. In real estate, we often reference the phrase “time is of the essence” and this couldn’t be more true as more and more homes become active on the market.