Trending #RealEstate - Part 2 | Kansas City Homes

Posted by Kansas City Homes on Wednesday, September 2nd, 2020 at 9:33am.

Trending Real Estate | Kansas City Homes

In part one of this blog series, we looked at three trends that are emerging from the post-shutdown real estate market. Those three were the rise in the millennial home buyer demographic, the use of video apps for real estate agents, and the exponential growth of online home-searching. Part two of our Trending #RealEstate blog discusses the mortgage rate cut in the early throes of the pandemic, and how it inevitably affected refinances, inventory, and what it will mean to the future of real estate. With remote work becoming the new normal for the foreseeable future, millennials entering the homebuyer market in force, and the widespread shift to suburban lifestyles, the real estate industry here in KC and beyond is set for an interesting end to 2020. 

Trending Real Estate | Kansas City Homes

Trend #4 - Mortgage Rates - A History

Sitting in a meeting early this year, paying close attention to the presentation on the future of mortgage rates, I got a buzz for a notification on my phone. The phone gave its familiar two buzz accompaniment, then fell silent and allowed me to remain engaged with First State Bank talking through the process of navigating the newly unfamiliar market-scape as a result of the pandemic. Just as soon as my attention flicked back, another two buzz notification buzzed through, followed by a cavalcade of buzzes throughout the room on all the silenced phones, interrupting the speaker who was also getting buzzes. It was mid-March and the FED had just cut interest rates to zero, meaning the industry was about to get very busy.

Your parents and grandparents faced a much different homebuyer market when they bought their houses. Throughout the decades, the interest rates have reached pretty shocking levels of ebb and flow. In the 70s, 30-year fixed rate mortgages capped off at 9.00% on average for a first-time homebuyer. The 80s saw rises up to 13.00% before steadily decreasing through the 90s and early 00’s to end up around 4.00%, on average, for 2019. Needless to say, mortgages are the backbone of the real estate industry. The market is mortally tied to that interest rate and it determines how it will perform year over year. 

When the pandemic hit at the end of 2019, the FED began cutting back slowly, incrementally, to follow along with economic performance. When the FED cuts rate, they are attempting to stymie any potential drops in consumer spending and encourage borrowing and lending. When panic set in in March, the FED was quick to act and thus interrupted meetings across the country with news of a 0% federal interest rate. Mortgage rates followed alongside until we get to today where we are looking at 2.88% rates, on average, representing an unprecedented and historic low for the industry. 

Our partners at First State Bank, found nearby all of our Kansas City Homes’ offices, had their work cut out for them as they were fielding hundreds of calls helping their clients refinance their loans to take advantage of the low rates. Not only that, an onslaught of mortgage applications came in with first-time homebuyers wanting to jump on the favorable market. 

Due to this rate drop, usually stringent bylaws on credit scores and incomes are being relaxed, allowing a much larger bracket of people to secure these low interest rate mortgages. The trend emerging is that these rates are here to stay with several experts predicting sub-3.0% mortgage rates well into 2021. Looking strictly at demand, on our Kansas City Homes Home Search App, traffic and search activity have increased exponentially through late August, meaning many people in Kansas City are looking at their options for a new home. 

With mortgage rates and inventory hitting all-time lows, shifts in remote work, rises in the digital home search, and millennials taking over as the key market demographic, 2020 has been a tough year to predict anything with certainty. With market conditions appearing favorable for consumers still, in late summer and early fall, experts like Lawrence Yun, Chief Economist for the National Association of REALTORS®, are predicting mortgage rates to remain low into next year.

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