A new projection into the housing market reveals that the historically low mortgage interest rates will persist into 2021 and beyond, but with a couple twists.
The three-year housing and mortgage outlook by CoreLogic also predicts that homes will continue to sell at a rapid rate even as the economy recovers.
In 2020, dropping interest rates and high buyer demand defined the real estate market. Over the next few years, little is expected to change, according to the report by CoreLogic.
Mortgage rates may even slip below 3% for the entirety of 2021 and perhaps parts of 2022, reaching lows not seen in a decade.
CoreLogic predicts the average mortgage interest rate will be about 3.2% through 2023, nearly a full percentage point lower than the previous decade average.
This is great news for families hoping to pay less on their mortgage rate, whether they are buying a home or refinancing an existing loan. With so many homebuyers securing low rates over the last few years, it is also possible refinancing will not keep up at its current rate.
Yet, there are tens of millions of homeowners who remain on the sidelines when it comes to lowering their mortgage interest rate through a refinance loan. About 20 million mortgages in the United States are currently in contract for a rate above 4%.
Over the next three years, home prices will not stop increasing but will show signs of slowing down. Home appreciation stood at nearly 5% annually over the last decade. The number will fall to about 2.5% per year over the next three years if projections hold.
The slowdown in prices will correspond with more home inventory. Recently, low inventory has caused prices to shoot upward as more people compete to buy homes. The rate of home construction will have to play catch-up but it is trending in the right direction to support a softening of home prices.
As the economy recovers and the pandemic takes a positive turn, the sale of existing and new homes will rise during this period. Over the next few years, millennials are expected to play a big role in the real estate market.