Mortgage industry experiences record activity.
Under normal circumstances, financial advisors recommend certain conditions before potential buyers apply for a home loan—favorable interest rates, reliable employment, and acceptable savings.
But circumstances for home buyers today are nothing like normal.
Circumstances for lenders are nothing like normal either, and financial professionals are making adjustments daily to address that.
“It’s like someone stepped on the gas,” says Green State Credit Union’s Amy Smith. “The mortgage market went from normal to beyond full speed in a matter of weeks.” She says rates had been low even before the pandemic affected markets, so activity had already been on the rise. But Green State’s mortgage lenders have never been busier. “Across the board, the mortgage industry is 70% to 100% busier than it was a year ago. But we’re not operating with 70% to 100% more staff,” she says.
The historically record lows—near 2% at press time—have opened up the possibility of home ownership to more buyers than ever, so inquiries and applications have skyrocketed.
Kim Downing-Manning of Bankers Trust says, “Even before COVID-19, we anticipated this would be a busy year. Rates were already low. And with it being an election year, we knew that would continue. But rates just kept dropping, and people are wisely taking advantage of that.”
“We’ve never had a market where there was a boom in refinances and home purchase mortgages at the same time. Both sides of the industry are experiencing unprecedented highs right now,” Smith says. She explains that typically rates fall when the economy slows down. Currently, while unemployment is rising, inflation is dropping.
“Normally there’s a bigger difference between mortgage and refinance rates,” says Downing-Manning. “Right now there really isn’t much of a difference. Rates benefit both. So whether clients are looking to buy their dream home and move up or put money into their current home or even just reduce their interest rate, the time is right for all of those.”
The months of quarantine during which homeowners were working from home and children were educating at home highlighted the need for more space or more-suitable space. This has led to a lot of motivated buyers for both new construction and resale properties.
“The resale inventory is low compared to demand,” Smith says. “I’m hearing of multiple offers on homes, more than 20 for one home recently.” Those low rates have benefited development and new construction as well. “A 30-year fixed loan is about 2.5% now [early August], and construction loans are at 3.75%,” she says.
“Although I don’t work with construction loans, it’s clear, just driving around, that builders are still moving a lot of dirt. Typically, construction and development loan rates are tied to prime, and that’s had a positive effect on those loans,” Downing-Manning says.
The steady activity during the height of quarantine resulted in occasional backlogs while many offices were closed. Many professionals, including real estate agents, appraisers, inspectors, and attorneys, were working from home or working limited hours.
Digital methods of completing sales, which were already in limited use, have been improved and implemented more consistently and are expected to become the norm in many aspects of the business.
As the busy construction season continues, mortgage activity remains at unprecedented rates. “Even with the uncertainties in the economy right now, folks who are employed feel pretty confident in their job situation after all the ups and downs lately, so they’re comfortable considering a move,” Downing-Manning says.
With rates this low, and likely to remain so at least through the end of the year, the seller’s market should continue.
As Smith says, with rates this good, anyone who qualifies is shopping.