The pandemic drove gas prices — among so many other things — to an all-time high, yet people didn't stop driving, despite the proverbial pain at the pump. Ted Edginton likens the pandemic's effect on fuel prices to what he's observed in the housing market.
When rates subsided from the low sevens to the six-percent range on a 30-year fixed-rate mortgage, "those who were ready to get their life moving again were still purchasing houses," explains Edginton, mortgage loan officer with U.S. Bank Mortgage Loan Originator in Birmingham.
"Many people realize that it's not worth waiting to see if and when rates improve. It could be six months; it could be a couple of years. I think that shock is over, and people are deciding it's time to move things forward," says Edginton, who lives and works in Bloomfield Hills and has more than 20 years of experience in the industry.
As a result of his longevity with U.S. Bank, clients continue to rely on him for their mortgage needs within the state and other parts of the country, which is rare because most lenders don't have that coast-to-coast reach.
Right now, Edginton believes the rates are not as important to many buyers because there's a high likelihood that they will refinance in the next few years. The current rates, he explains, are placeholders so people can secure housing and are in line with averages we have seen over the last 25 yrs.
Over the last two-and-a-half-plus years, we've seen some unprecedented phenomena in the market. Social distancing measures and the financial uncertainty caused by COVID-19 prevented prospective buyers from stepping foot inside a home before purchasing it.
Then, as restrictions eased, pent-up demand rose nationwide, the lull in home sales quickly turned into a sellers’ market, and buyers began offering more than the asking price, waiving home inspections and bringing cash to bridge potential appraisal gaps. Securing housing became a priority.
With all the volatility we've seen since 2020, what can we expect in 2023?
"It's going to be a steady market, especially here in Michigan, just like what we're seeing now. Maybe, rates will go down a little. Still, it will continue, in my opinion, to be a good market for a first-time homebuyer," says Jumana Yousif, a loan officer with Beyond Lending in Bloomfield Township who specializes in helping women secure funding.
What other trends do these mortgage specialists expect?
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For people in the area looking to purchase in the higher-end segment, jumbo options and construction financing products are available to purchase, build and renovate their homes. There is a common concern that jumbo rates are higher than those in the conventional arena, but it's typically the opposite, according to Edginton.
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We are seeing homebuyers who have gone through the pandemic, saved money, or have family helping finance the purchase. As a result, many first-time homebuyers are jumping over that first-time homebuyer segment, skipping the starter house in order to prevent a second move once the family and finances grow. Edginton says one possible explanation for this is an absence of affordable homes in the area for first-time homebuyers.
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More options are coming out for first-time homebuyers to make housing more attainable. This includes offering mortgages for low to moderate-income buyers, programs for down-payment assistance and low down-payment mortgages.
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“Mortgages are performing very well, and we aren't seeing foreclosure issues like we did more than a decade ago,” Edginton says. Many homebuyers or homeowners refinanced over the last couple of years at rates somewhere between three and four percent. These homeowners will not be moving or refinancing any time soon. But, in general, the way mortgages are underwritten and approved today is stricter than they were. As a result, Edginton says, people qualify more comfortably and accurately for their mortgage, allowing homeowners to stay in their homes because they were underwritten with more credibility.
