With all sorts of trends, signs, and predictions for what 2020 may hold for the housing market, one thing is for sure: there is no way to absolutely know what’s ahead. Today’s headlines offer a glimpse of what factors might impact the housing market this year.
While the future may be cloudy, there is a way to win in a variety of economic outcomes. How you may ask? Check out how you can benefit in 2020 whether interest rates stay the same or if they change.
If Interest Rates Stay the Same…
In this scenario, interest rates will continue to remain historically low and home prices healthy. While this could be seen as the status quo, these are favorable signs for the homebuyer and the economy. Lower interest rates provide an incentive to purchase now.
If interest rates continue to remain historically low or fall even lower, it might be time to think about a bigger purchase such as a home. Plus, with low interest rates, you can pay off your home loan faster and pay less interest over the life of your loan—allowing you to own more of your home along the way and build equity faster. If you’re renting, it may be time to consider purchasing a home or condo to take advantage of historically low interest rates and competitive terms.
If Interest Rates Rise…
If the housing market experiences higher interest rates, it often means the economy is doing well and can benefit homeowners. In such an economy, homeowners may realize an accelerated appreciation of their properties. It stands to reason that people typically spend more when they are more secure about their economic future. Thus, they are more willing to invest as homeownership rates, in turn, go higher.
If you’re a homeowner who has built up enough equity in your home, a cash-out refinance is an option to consider should interest rates increase. While an existing fixed-rate, fixed-term loan will remain unaffected in this or any scenario, an Adjustable Rate Mortgage (ARM) provides a short-term benefit during a period of continued lower interest rates.
If Interest Rates Go Down…
While a home’s value can decrease during a downturn, it can potentially still be a good time to make a bigger purchase or even consider refinancing your existing mortgage to lock in a lower interest rate.
An added benefit of a housing market that is not as overcrowded may be more homes to choose from and a bidding process that may not be as competitive. This could lead to more favorable sales prices for homebuyers and a lower monthly mortgage payment.
Other Factors to Consider
If you’re thinking about selling your home during an economic downturn to become a renter, it can actually be more incentivizing to remain in your home if you’re able to do so. By staying put, you are getting closer to owning your home with each monthly mortgage payment.
However, if you’re not in a position to buy a home, it’s a great time to work on paying down your debt and improving your credit score. With enough work, you could put yourself in a better position for future homeownership.
So are you ready for a new home loan in 2020? A New American Funding Loan Officer is happy to discuss your options with you and help you get a home loan to fit your unique situation. Let’s talk about it!