2021 Homeownership and Consumer Outlook

At UW Credit Union, we’re here to help everyone achieve their homeownership dreams. Here’s a synopsis of market conditions, along with steps buyers can take to reach their goals with confidence.

Falling rates and their implications

We continue to see a favorable borrowing environment for homebuyers. Mortgage rates remain low and Fannie Mae reports that most Americans feel now is a good time to sell a home. However, half of Americans believe that home prices will continue to rise. 1

Fannie Mae’s Home Purchase Sentiment Index reported:

  • 53% of Americans say it’s a good time to buy
  • 61% of Americans say it’s a good time to sell
  • 50% of Americans think mortgage rates will increase in the next 12 months
  • 82% of Americans are not concerned about losing their job
  • 25% of Americans say their household income is significantly higher than 12 months ago
  • 50% of Americans believe home prices will go up in the next 12 months

These trends may have numerous implications for homebuyers and homeowners alike.

Increased demand. Increased time spent at home over the past year has prompted many Americans to seek out new or bigger homes to accommodate changing needs. With more millennials reaching prime buying years and many Americans enjoying job security, there is more motivation to buy than in years past but fewer overall homes on the market.

Refinance boom continues. While the Mortgage Bankers Association predicts that rates could rise up to 3.7 percent by the end of 2021, rates will remain low overall. Homeowners looking to pay off their homes sooner and save on interest over the loan term may opt for shorter-term refinances. Cash-out refinances may also prove a popular way to free up cash for responsible borrowers.

Home equity rises. The falling-rate trend will benefit homeowners who want to use their home equity with a loan or line of credit. U.S. homeowners are sitting on a record amount of home equity available to tap—$7.3 trillion through the end of the fourth quarter of 2020. 2  While some banks exited the home equity line of credit (HELOC) market last year, a HELOC with UW Credit Union is always available, and gives homeowners the option to lock their rate by converting all or part of a line of credit balance to a fixed-rate home equity loan. 3

Tight housing supply, higher home prices

Housing inventory levels throughout Wisconsin and the country are at record lows. Here’s a snapshot of potential impacts.

Rising home prices. Low housing stock and high demand are pushing home prices higher. According to the National Association of Realtors, prices of existing homes soared a record 17 percent from March 2020 to March 2021. This is great for sellers but creates a hyper-competitive environment for homebuyers.

Selling vs. staying put. While the “mover-uppers” may benefit by getting their asking price—or above—they may also have to pay a premium for their next house. Consequently, some may decide to upgrade their existing home with a HELOC.

Tips for a successful home search

From a lender’s perspective, here are some actions prospective homebuyers can take to increase their chances of securing their next home without getting swept up in a competitive market.

  • Talk to your lender about what max payment make sense for you, and the overall price range you are comfortable with. Understanding your monthly budget will help inform an appropriate spend level. Keep in mind, what you qualify for can be quite different from what you’re comfortable with.
  • Get preapproved and get a preapproval letter before you go shopping. Given the competition for homes, sellers are less willing to deal with buyers who make an offer but subsequently may not qualify for a mortgage.
  • When writing offers, allow reasonable time frames and make sure to get your accepted offer to your lender immediately. No buyer wants to risk a sale by going back to the seller to ask for a deadline extension.
  • While a larger down payment may indicate financial stability to sellers, don’t put 20% down if that depletes your reserves. Being prepared for unexpected financial challenges is important.

Why choose UW Credit Union?

We are Wisconsin’s top mortgage lender with decades of experience helping people become homeowners. 4

We offer:

  • Local Mortgage Loan Officers in branches
  • Online applications and easy rate quotes
  • Wide variety of home loan products and competitive rates
  • Free monthly first-time homebuyer webinars
  • Low closing costs, including up to $1,000 off closing costs for first-time homebuyers 5
  • $250 closing cost credit with Premium Checking 6

Call 800-533-6773, ext. 2810, to reach the UW Credit Union Mortgage Loan Department.

 

uwcu.org
P.O. Box 44963 | Madison, WI | 53744-4963 | 800-533-6773

1 “Housing Sentiment Jumps on Consumers’ Selling and Personal Finance Optimism,” 2021, Fannie Mae. 2 “Why Home Equity Loans Are Still So Hard to Come By,” Robyn A. Friedman, April 29, 2021, Wall Street Journal. 3 Fixed Segment rates available on new and most existing HELOCs, see the Fixed Rate Conversion Option section of your HELOC addendum for feature eligibility. You may exercise up to a total of 5 options during the draw period of your loan. Each option must be exercised for an advance/balance of at least $5,000. The first option fee is waived. A $25 fee applies for each time you exercise the option thereafter.4 Source: Bankrate analysis of Home Mortgage Disclosure Act data, via LendingPatterns  5 UW Credit Union closing cost credit is variable and may be up to $1,000. Credit will be calculated on actual cost, excluding owner’s title and transfer tax fees, and will be reflected on the Closing Disclosure (CD). Offer valid for purchase transactions only; refinances do not qualify. Offer valid for first-time buyers only. An individual is to be considered a first-time home buyer who (1) is purchasing a property; (2) will reside in the property as a principal residence; and (3) has had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the property. The discount will be applied at closing as a lender credit and reflected on the CD. This offer excludes VA, FHA, WHEDA, lot, construction and Rapid Refinance loans. Offer valid for first mortgages only. Offer is subject to credit approval and underwriting and is subject to change without notice. Mortgage insurance is required for transactions over 80% LTV. This offer requires an established UW Credit Union checking account. No other discounts apply; cannot be combined with any other offers. Contact us for details. 6 Membership requirements apply. Member must have a UW Credit Union Premium checking account opened at least 20 days prior to closing date to receive $250 closing credit, which will appear as a credit on the final Closing Disclosure. Offer subject to change and without notice. $250 closing credit is not available to borrowers who receive our first-time homebuyer closing credit and is not available for the following loan types: lot, construction, WHEDA, FHA, VA, and Rapid Refinance. Contact us for details.