Experts anticipate continued demand in the housing market.
Story by Tracy Dickinson
Featured in November/December 2021
Nearly a year ago, shockingly low interest rates were driving homeowners to refinance or purchase new homes at a record pace that outstripped lenders’ ability to process the paperwork.
The pace might have slowed a bit since then, but the rates haven’t, and local professionals say there’s no end in sight.
“Rates are still around 3% for a 30-year fixed rate mortgage,” says Bankers Trust’s Kim Downing-Manning. “There really hasn’t been a lot of movement since summer, which is a little unusual.”
GreenState’s Brekken Klomstad adds, “The interest rates are just fantastic for both purchase and refinance customers, and rates are forecast to remain this low through the end of the year.”
The refinance market has been less hectic the second half of the year than the mortgage market, primarily because so many homeowners refinanced in 2020 when rates first plummeted. Downing-Manning says the only thing keeping the mortgage activity from returning to last year’s nearly unmanageable pace is the lack of inventory.
“Inventory is so low and there are so many buyers out there, properties get snapped up the minute they’re listed,” she says. “If there were more inventory, we’d be even busier than we already are.”
“We work hard to educate buyers and ensure they’re prepared when looking for a home,” Klomstad says. “What’s changed is that buyers may not realize they have more wiggle room in their budget than they thought.”
He says that such low interest rates can translate into tens of thousands of dollars in additional purchasing power to a minimal difference in monthly payment. Rather than begin the conversation with a ballpark purchase amount, he suggests focusing on your monthly budget instead.
“Knowing what a homeowner is comfortable with for a monthly payment is often a better starting point,” he says. “From there, we can give them a more realistic purchase price.”
Downing-Manning says the competitive market has made it important to discuss “backup plans” as well. An experienced lender and a knowledgeable REALTOR® can partner with you to look at options as you begin your home search.
“At Bankers Trust, we’ve been doing this a long time,” she says, “so there isn’t much we haven’t seen before. That experience allows us to advise our customers on options if they aren’t successful with their first offer. We can walk them through what it’s like in a market like this and help them map out options ahead of time.”
If you’re considering a move during this seller’s market, prequalifying has become an absolute necessity say both Downing-Manning and Klomstad.
Klomstad agrees. “Pre-approval has always been a valuable tool, but that’s even more important now,” he says. “Not only is the buyer ready when they go out to look at homes, but it saves time later, which is really important when homes are selling as fast as they are right now.”
Downing-Manning says, “In a market like we’ve had this year, most sellers won’t even look at an offer if the buyer isn’t pre-qualified. We’ve even provided letters for homeowners who were making cash offers, to verify that the funds were available, so the seller would consider their offer seriously.”
The combination of factors that created the seller’s market we’re experiencing—consumers with money to spend, unbelievably low interest rates, and a shortage of homes on the market—is expected to continue well into next spring and even beyond.
Downing-Manning says one aspect of the home-buying process that is beginning to improve is the verification processes, which will help speed up pre-qualification applications.
“Because of Covid restrictions and the strange employment situations so many buyers were in, we had to go through a whole different set of documentation guidelines, especially with employment verifications,” she says. “Things aren’t quite back to pre-pandemic procedures yet, but it’s getting better.”
Having that pre-approval in hand enables you to shop more confidently in this competitive environment.
“Unless there’s an employment change, that pre-qualification is valid for 120 days,” Klomstad explains. “And if the buyer doesn’t find a home within that time, we simply re-verify the credit report, and they’re good for another 120 days.”
With homes selling for well above the asking price, you might be inclined to panic or make a hasty purchase decision. That’s why both Klomstad and Downing-Manning say that, more than ever, their job involves providing their customers with peace of mind.
“I’m a firm believer that everything happens for a reason,” says Downing-Manning. “Buying a home is a huge investment, and we don’t want our customers to settle or to make a rash decision. Working with a great REALTOR®, getting the paperwork done ahead of time, and being proactive instead of reactive goes a long way toward accomplishing that.” •
- Kim Downing-Manning Bankers Trust
- Brekken Klomstad GreenState Credit Union