The 5 New Mortgage and Housing Trends for Summer 2013

A record-high number of buyers are going to be looking for homes in the late spring/early summertime months, thanks to low mortgage rates.  Sellers have a lot to look forward to as home inventory continues to shrink.  Here are some other significant trends to know about for the upcoming months:

1. Low inventory, high prices, and bidding wars

Competition will be plentiful for homes in the upcoming months; homebuyer demand is increasing more rapidly than the home supply can effectively meet.  Many buyers are having to deal with bidding wars, which add to the challenge of inexperienced groups such as first-time homebuyers. 

In February 2013, there were 1.94 million homes for sale across the nation.  At the time, that figure represented a 4.7 month supply at February’s sales pace.  On average, a market needs a six month supply in order to be considered “balanced.”  A year ago, the supply was resting at a steady 6.4 months.

2.  Loan modifications simplified

Homeowners who aren’t current on their mortgages might get an easy break reducing their future payments.  In July, the FHFA will implement a streamlined loan modification program to borrowers who are guaranteed by Freddie Mac or Fannie Mae.  Homeowners who are at least ninety days behind on their loans but less than two years behind will be informed of the program.  In order to effectively qualify, borrowers must owe eighty percent of the home’s value or less.

This new modification will extend the term of the loan to forty years and will reduce the interest rate.  No financial paperwork will be required.  This option will be quite popular for those who are self-employed and behind on their mortgage payments.

3.  FHA Loans Lose Popularity

Borrowers who are looking for an FHA loan will need to do so by June 2^nd.  This is the date that the Federal Housing Administration will start charging mortgage insurance for the life of the loan.  In the past, borrowers were only charged mortgage insurance until their balance reached seventy-eight percent of the home’s original value.

If a down payment is made that is less than ten percent, mortgage insurance will be required for the lifetime of the loan.  If a down payment is made that is over ten percent, mortgage insurance will be required for a minimum of eleven years. 

4.  A Resurgence of Cash-Out Refinances and Equity Loans

Last year, around 1.7 million homeowners regained their home equity.  Around 1.8 million homeowners are currently very close to regaining their equity, but are waiting on home values to increase by five percent.

As home prices have been increasing, it’s possible that a good amount of homeowners will tap into their equity by taking out home equity loans and cash-out refinances.  Many homeowners have been taking out these loans in the last few months to pay for college expenses and credit card debt.

5. Low Mortgage Rates

Although mortgage rates have shown signs of rising and are unlikely to return to the record low rates of the first quarter of 2013, mortgage rates are still low by historic standards. Rates are predicted to rise gradually throughout the second half of 2013. Even by the end of the year, the rates will have gone up slowly but won't be anything worth stressing out about.

Gretchen Wegrich

Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.