The U.S. mortgage market has had a rough go of it in the first quarter of this year, with mortgage volumes in Q1 down 60% on the year.
This came on the back of the severe winter, higher mortgage rates, and regulatory uncertainty.
But the mortgage market is changing.
Since the middle of 2013, the U.S. mortgage market has slowly been "undergoing a major reset from a refinance- to a purchase-driven market cycle," writes Anand K Nallathambi, president of CoreLogic.
Nallathambi points out four things that will "change the face of the mortgage market:""Shifting Demographics:" Typically at this point in housing recoveries, first-time homebuyers tend to be in the market, but that isn't the case with Millennials (21-34 year olds). "Although the higher level of education achieved by many millennials portends future earning potential, they are still facing difficult job prospects in the near-to-medium term," writes Nallathambi. "As a result, they have remained renters longer than expected. At the same time, as investors leave the market, baby boomers are retiring in record numbers. This is a trend that will continue to shape the housing market for the next two decades." "Underlying health of the U.S. homebuyer:" This recovery was driven not by strong income growth and fundamentals but by accommodative monetary policy. "Until we see a sustained pathway to job creation and income growth, we will continue to see potential homebuyers hesitate to take on mortgages and purchase homes," writes Nallathambi. "Unintended consequences of low interest rates:" " Low interest rates could exacerbate supply side issues in the housing market. Consumers locked in low interest rates when refinancing their mortgages. And while this helped consumers it raised the "the possibility that these homeowners, at least for the medium term, will be staying out of the housing market, thereby prolonging the current inventory shortage and reducing the pool of possible buyers," writes Nallathambi. "The End of the Investors “Gold Rush:'" You can still find investors in parts of the U.S. but the bargains they're looking for or the types of properties they are in the market for, are declining. "Our research shows that investors are leaving the market and first-time and trade-up buyers will need to step in to fill the void," Nallathambi writes.
See Also:There's One Big Red Flag In The US Housing Market DataDon't Be Fooled By Reports Of Rising Home PricesTRULIA: Home Prices Aren't In A Bubble, They're Actually Undervalued
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