Yesterday, Freddie Mac released its market outlook for August. In short, the report focused on the economy getting back to a more normal state, with housing being driven by the fundamentals. What are the housing fundamentals that will drive this “more normal” economy?
- New job formation. Through July, the labor market has added 230,000 new jobs. Robust? No, but better than shrinkage. No one likes shrinkage.
- Household formation. In the last four quarters net household formation totaled 458,000 compared to a forecast of at least 1.2 million. It is not shrinkage but those basements and extra bedrooms must be close to capacity. Tucking away over 800,000 households into existing households must create a strain, and greater pent-up demand.
- The mortgage payment-to-rent ratio is near the lowest in 35 years. With a good rental history for the last two years there is a good possibility you can buy.
- The current forecast is for continued economic growth and the unemployment rate on a gradual decline. These two factors should contribute to an even bigger bubble of pent-up demand.
What can this mean for housing? Pent up demand suddenly unleashed, coupled with a low inventory of resale and new construction listings would create another surge in home prices if rates stay in their current range. Only those at the top of the income levels would be the best candidates to actually purchase that first home.
Did you know you can be gifted the entire down payment for a mortgage loan? That is right and lending guidelines allow you to borrow up to 96.5% of the cost of purchasing and major remodeling of a beat up home. With as little as 3.5% of the total cost (which can be gifted) you can make an offer, purchase and have the money set aside for the remodel. Pretty cool, huh?
What about mortgage loans? Loan applications are down across the board. Every lender is scratching for loan closings. What does this mean for you? You can really negotiate a great deal. Contact me if you want to learn the five easy steps to shop for a loan.