Dec 29, 2017

What’s ahead for homebuyers in 2018?

What will 2018 bring for mortgage lenders and homebuyers? Tony Weick, leader of Bell Bank’s mortgage division, looks at trends in rates, credit and housing inventory – and what they’ll mean to homebuyers.

2017 Mortgage Industry Review with Tony Weick

As 2017 comes to a close, we look back at a year where rates, credit trends and housing inventory heavily influenced the mortgage industry and will continue to have an even greater impact in 2018.

Economic Factors

Rates continued to surprise us this year, again staying lower than projected – giving buyers more reason to purchase their dream home or take advantage of refinance opportunities. Low unemployment and a mostly steady economy provided more stability, fueling the purchase market.

While it’s still too early to know the ultimate impact tax reform will have, there may be some parts of the proposed legislation, namely changes to the mortgage interest deduction, that directly influence the housing market. At this point, we believe the impact on mortgages will be relatively minor. The economy is expected to continue to grow in 2018, with rates predicted to climb slowly throughout the year. This will foster a continued decline in refinance activity, but home purchases are anticipated to grow another 7 to 8 percent in 2018. 

Credit Market

Credit markets continued to loosen throughout the year with the expansion of credit options. This year new programs requiring lower down payments (as low as 3 percent), additional down payment assistance programs and new guidelines regarding student loan debt became available, helping bring many more  first-time buyers to the market. The trend of slightly easing credit requirements is expected to continue in 2018. This doesn’t mean going back to what was in place a decade ago, but instead allowing for a well-balanced risk tolerance, appropriate for the marketplace we see today, which ultimately will benefit consumers.

Housing Inventory

While low rates and an improving economy fueled the desire to buy, low inventory made finding the right home difficult for many buyers. Demand continued to drive home values up, and bidding wars were common during the prime buying months, especially in the first-time homebuyer category.

Builders again increased the number of houses they added to the market this year, but new construction continues to lag as buyer demand remains strong. Minnesota saw one of the larger increases in new construction, yet there wasn’t enough inventory being built to meet buyer demand.  The lack of affordable housing has had a significant impact suppressing growth, and with purchase activity predicted to increase in 2018, it is expected to continue to be a factor driving availability as well as affordability.

There is a lot to be excited about for 2018. If you have any questions about buying or refinancing, give us a call!