Trend 1 - Low inventory rates will continue.

Inventory is down 30% in 2021 with no end in sight. In the spring of 2021, houses were selling 20 days faster than in the past several years.

What does that mean for sellers? It means you have to be flexible and prepared to compete. Widen your definition of “dream home”. Decide what you must have and what upgrades you’re willing to make over time. Finding the least expensive house in a great neighborhood is still good advice.

Be willing to consider a number of different neighborhoods. If you can’t afford the neighborhood you want, work with your Realtor to find a good neighborhood with properties in your price range.

It’s more important than ever to get pre-approved for a loan before you start house hunting. If you don’t, sellers may not even consider your offer. Pre-approved buyers will definitely have the edge for the foreseeable future.

What does low inventory mean for sellers? It means you’re in the driver’s seat. You are more likely to get top dollar for your property and have the luxury of picking and choosing the buyers you want to work with.

Trend 2 - Home prices will continue to rise.

Home prices rose by nearly 20% in the first months of 2021. The national average is now $300,000 - $400.000.

What does this mean for home buyers? You have to decide what you can afford and stick to your budget. Adhere to the 28% rule. That means your mortgage payment is no more than 28% of your gross income. Be sure to factor in taxes, interest, and insurance in addition to the principal.

If possible, try to make a 10% - 20% down payment. If you can manage a 20% down payment, you’ll avoid the extra cost of private mortgage insurance. Even a 10% down payment will save you in fees and interest.

Trend 3 - Mortgage rates will remain low and may get lower.

Mortgage rates hit record lows in 2020 and are predicted to go even lower in 2021. According to the National Association of Realtors, Fannie Mae, Freddie Mac, and the Mortgage Bankers Association, 2021 rates for a 30 year mortgage are expected to average 3.075%. That’s down from 3.125% in 2020. This trend is expected to continue through 2021.

Trend 4 - Virtual real estate services will thrive.

More and more real estate services for buyers and sellers are being offered online. Previewing homes online was popular before the pandemic, but became a necessity during it. Documents are reviewed and signed online. Virtual closings are becoming more common. Virtual technology will increasingly dominate the real estate process.

Trend 5 - Creative buying options will continue.

Some home buyers are trying to get creative in order to accomplish their dreams of home ownership. Rent-to-own is not new, but has seen an increase during the pandemic. Some buyers who have experienced financial hardships during the past year and a half, and currently don’t qualify for a traditional mortgage, are opting for rent-to-own.

The upside is that it gives you time to save for a down payment while living in the house you want. The downside is that rent is higher because a portion of it is being put into ownership. If you later decide you don’t want to buy the house, or the contract is broken, you’ll lose all the extra money you put into it.

Trend 6 - Migration due to COVID continues.

According to United Van Lines, more people migrated to Idaho than any other state in the last two years. Conversely, New Jersey saw the most outbound traffic in the country. The United Van Lines study saw people moving west and south in 2020. The majority of people who moved specifically because of the pandemic did so to be closer to family, over anxiety for personal and family health, and because of changes in work opportunities. These people may find it difficult to qualify for a mortgage because they lack a current, stable job history and the funds for a substantial down payment.

Top states that gained in the migration trend included South Carolina, Arizona, South Dakota, and Oregon. Top states seeing the most outbound migration included California, Illinois, Connecticut, and New York.

Trend 7 - The pandemic will continue to affect FHA mortgage lending.

FHA lending has gotten stricter thanks to COVID. As Americans lost jobs or worked part time for reduced wages, the risk of foreclosure rose. In response, lenders began raising FICO score minimums. That means lower credit borrowers have a tougher time getting mortgage approval.

The minimum credit scores acceptable to the FHA haven’t changed. You need a score of 580 if you’re making a 3.5% down payment and at least 500 with a 10% down payment. What has changed is that those scores aren’t acceptable to most lenders these days.

According to Forbes.com, a 680 to 740 requirement isn’t unusual. Lenders are also using tiered interest rates that virtually shut out lower credit borrowers. Even in-progress loans are in jeopardy if the borrower’s FICO score isn’t high enough to meet today‘s standards.

Trend 8 - Housing counselors will continue to be in demand.

Because of all the layoffs, reduced work hours, and furloughs, many homeowners have found themselves under water on their mortgage payments. The government required many lenders to offer borrowers loan forebearances, allowing them to temporarily make partial payments or no payments at all. The deadline to request mortgage forbearance has been extended from June 30, 2021 to September 30, 2021.

Some borrowers are making up the past due payments by paying a little extra each month for a certain period. Others are adding the past due payments to the end of their mortgages. Most lenders aren’t going to require lump sum payments to get borrowers up to date on their mortgages.

Not all borrowers believe that though according to Ellie Pepper, the National Housing Resource Center’s relationships and innovations director. These borrowers tend to duck lenders trying to contact them, but will talk to housing counselors. For that reason, the need for housing counselors isn’t going away.