Interest Rates Remain Low
The cost of borrowing money plays an important role in the housing market. Real estate ventures, including commercial development and personal investment properties, are largely driven by interest rates. The Fed helps the recession recovery process by manipulating bank rates and loan interest rates. Mortgage rates are expected to remain low throughout early 2021. Sustained reduced interest rates open the door to home ownership for many first time home buyers. Investors and real estate developers can also take advantage of the low interest rates to spark economic development.
Mortgage Applications Lag
Typically low mortgage interest rates would produce a buyer’s market in real estate. However, current conditions do not follow historical patterns. The quandary is that many potential borrowers have been subject to unemployment due to the pandemic. Staggering unemployment rates and insecurity within many sectors has kept mortgage applications at a nearly all time low. Buyers are hesitant to take the plunge into home ownership when they are uncertain of their own career track. The FHA and other quasi-government agencies will likely combat the low application statistics with incentives. Qualifying factors such as down payment and credit requirements. These steps will encourage applicants who can maintain monthly mortgage payments and have a healthy stash of emergency savings in place.
Home Prices Continue to Fall
Before and during recessions in the United States, home prices fall in accordance with other economic factors. During the worst economic times of the Great Depression, the overall housing prices dropped nearly 30%. Thankfully, the country has learned from past mistakes and now has a better handle on navigating through uncertain financial times. Stagnant growth in real estate gradually gave way to a general drop in prices. The 2021 forecast expect to see prices drop by around 3% and hopefully hold steady at no more than a 5% drop.