The State of the Mortgage

Looking to buy a home? Believe it or not, it might be easier than it’s been during the last two decades to secure a mortgage from financial institutions.

home-priceAccording to a survey of senior loan officers commissioned by the Federal Reserve, at negative 18.3 percent, the net percentage for prime mortgages was the lowest it’s been since the central bank started tracking it in 2007. The number was also higher than comparable numbers in the 1990s and 2000s, according to Bloomberg.

But have no fear; we’re not in for another bubble-bursting scenario, at least according to analysts at JP Morgan Chase.

“The magnitude of the tightening during the crisis was so extreme that it dwarfs recent changes,” the analysts wrote in a report. “Just because a large percentage of survey respondents said that they were loosening standards doesn’t mean that they were loosening them by a large amount.”

I Saw You – With a Mortgage in Your Hand

On top of the bank’s loosening their standards, here’s another gem for those looking to secure mortgages: Freddie Mac recently announced that the average rate of a 30-year mortgage dropped slightly from 4.14 to 4.12 percent, while the rate of a 15-year mortgage declined from 3.27 percent to 3.24 percent. Both of those rates are lower than they were at this time last year.

While all of this news appears great for those who are looking to buy homes, it appears as though the millennial generation – typical defined as those born between 1980 and 2000 – are not yet showing a fervor when it comes to buying a home.

As such, the private mortgage market is currently valued at $1 trillion, about half of what it would be in a standard economic climate, according to Anthony Hsieh, CEO of loanDepot, a company that offers mortgage services

“Private capital is not back into the mortgage marketplaces, and this is seven years after the crisis,” explains Hsieh. “Credit has not been widened or deepened, and there isn’t enough product innovation to offer loans to this generation. The only programs are still regulated very tightly by the government.”

To Buy or Not To Buy? That is the Question

New home sales have suffered lately, falling 8.1 percent in the month of June. Obviously, as the housing market goes, so too goes the rest of the economy. As such, it’s important that financiers consider making the barriers for first-time homebuyers fewer and fewer.

Facing a difficult job market, the prospect of seemingly insurmountable student loan debt and wages that generally don’t keep up with inflation, millennials certainly have their work cut out for them when it comes to finding the means to become a homeowner, thus fulfilling the American dream.

If the millennials don’t end up becoming major players in the housing market, what does that bode for the future of the country? It doesn’t take a Nobel laureate or distinguished economist to understand how such a scenario could adversely impact the entirety of the economy.

So what? If you’re in the market to buy a home for the first time, you should take it as a good sign that mortgage rates are slipping to lows. But how much further will those rates go down?

To protect their livelihood, financiers need millennials to take out loans. The main question about mortgage rates is slowly becoming evident: How long can they go?