Equity Matters: No Homeowner Left Behind!

As we round the corner into winter 2021, it finally feels like the Pandemic, natural disasters and societal turmoil of 2020 may finally be behind us. Across the nation, “vaccination euphoria” is setting in as states reopen their doors to business, entertainment, and tourists. Armed with their immunity superpowers, people everywhere are dressing up, going out and making travel plans.

Americans are back to work, and the economy is quickly rebounding. As consumers and businesses spend more, pricing goes up and the new buzz word on the street is Inflation. Inflation is the decline of purchasing power of a given currency over time, in this case the U.S. dollar. This means that it will take more money to buy the same things that we need today.

So the question is, how will the 2021 economic recovery affect the housing market?

1. Affordability Index – The National Association of Realtors affordability index measures whether an average family could qualify for a mortgage loan on a typical home. A typical home is defined as a national median-priced, existing family home. In March of 2021, the median home price in Oahu rose to $950,000, with the average home sale about $1.17million. In response to this, the Fannie Mae and Freddie Mac conforming loan limit for Honolulu County was increased to $822,375. This means that a family in Hawaii would need to earn about $114,000 per year to qualify for this loan amount, as long as they carried little or no other consumers debts. According to Payscale.com, the average income in Honolulu is $66,000. Thus, the affordability index in Hawaii is 1.727, requiring a dual income family to purchase a home.

2. Household Formations Vs Housing Creations – Needs based housing is the driving fac tor behind the low home supply and housing inventory. Household formations can be defined as the social events that lead to a family or household seeking a new place to live. This can be urged by a certain demographic, like the millennial generation coming into their 30’s and becoming first time homebuyers; or the effects of a Pandemic that forced many families to hyper-focus on their living conditions and make changes. Housing creations can be defined as the rate at which Developers build homes and offer new supply to the housing market within a given period. A housing start is counted when construction begins on the footings or foundation of a residential home and is an indicator of economic conditions. Housing starts in the U.S. sank 10.3% month-over-month to an annualized rate of 1.421 million in February 2021, the lowest reading in six months and well below forecasts of 1.56 million nationally. In contrast, household formations reached the highest level in 14 years in December 2020 as people moved away from big cities due to the coronavirus pandemic. It is this gap between household formations and new housing creations that lead to the accelerated home pricing.

3. Rising Interest Rates – The Covid-19 pandemic caused an unconventional recession, and we do not expect the recovery will be ordinary either. While the paramount policy goals of the White House are to control the virus, get to full employment and make the necessary investments for a more resilient rehabilitation, economic recovery brings with it certain risks. Inflation is one of the major risks and the rising interest rates is a byproduct of the economic recovery. According to Forbes. com, mortgage interest rates for a 30 year note hit its lowest point in January of 2021 at 2.5% and currently is edging towards 3.25%. A 0.75 change in rate can negatively impact the purchasing power of the Hawaii homebuyer, as it can mean upwards of a $400 payment increase of an $800,000 mortgage scenario.

4. Flexible and Alternative Loan Types – With the shutdowns of 2020, many businesses suffered drastically. This led to many homebuyers and homeowners having to hit pause on their financial transactions and purchases due to major drops in income. Thus, there were many families which were unable to refinance or purchase a home in 2020, due to the inability to qualify because of this income decrease. Although many W2 employees are back to work, a good deal of the self-employed borrowers are continuing to take huge losses on their tax returns for 2020; which continues to impact their ability to qualify for a traditional mortgage with conventional or government financing. In response to this, the mortgage program market has expanded with new, creative programs to help these folks qualify, either with bank statement mortgage loan programs or asset depletion programs which allow for banking deposits to be considered as a source of income, in lieu of tax returns.

The key to navigating the changing mortgage climate is to be sure to align yourself with a knowledgeable Mortgage Expert that can lead you to financial success. At PRMG, our motto for 2021 is No Homeowner Left Behind, because we pride ourselves in offering traditional, as well as creative financing options for those who may find themselves “outside the box”.

We have a dedicated team of Mortgage Experts to help you and we offer free consultations! Visit https://oahu494.prmgapp.com/HonoluluTeam.html today to book your appt with one of our Specialists!

Questions for Judy Meredith? “The Mortgage Professor”

Email me: I welcome the opportunity to help You find solutions!

jmeredith@prmg.net

Judy Meredith
“The Mortgage Professor”
Branch Manager
Direct: (808) 222-7903
NMLS ID: 716323