Over the last few years, the thing that's kept the mortgage market afloat is the rate at which current homeowners have been moving to take advantage of near-record affordability to lock in extremely low rates. Meanwhile, a number of factors conspired to keep buyers out of the market, by and large. Those situations are expected to reverse themselves over the course of 2016, though.
The fact of the matter is that buyers were largely not in the housing market over the last few years simply because many Americans were hit pretty hard by the economic downturn, which may have set them back in their ability to put money into savings for the purposes of making a down payment. Some may have even been forced to dip into those savings to make ends meet. Still more also likely saw declines in their credit scores which would have further put them behind the 8-ball, because lenders increased qualification standards significantly in the wake of the housing market's collapse.
Why will buyers come back?
The good news for the housing market, though, is that many experts now foresee a big wave of would-be buyers making purchases later this year. That's because a confluence of circumstances should serve to create a very buyer-friendly market that simply has not existed for the last several years or more.
First and foremost here, is that it is slowly becoming apparent that the long-expected spike in mortgage rates might be a lot more gradual than many experts probably thought, and that the projections for rates to reach as high as 5.5 percent or even 6 percent before the end of 2016 might not seem reasonable even by the middle of the year. Instead, if mortgage rates and home prices alike stay relatively moderate, that alone might draw more buyers into the market, especially if they begin to understand just how affordable current conditions are.
Moreover, though, as rates rise and refinances become a little more scarce because current owners are being priced out of the market, lenders might bring down some of those still-high standards to accommodate more buyers. The fact is that while the economic recovery has brought many consumers back toward being able to buy, a lot still can't meet the current standards held by lenders, so any slackening there could go a long way to boost purchase activity.
But what's the biggest reason?
In addition to all that, though, the fact of the matter is that all the financial turmoil consumers have faced in the last several years just hasn't done much to diminish their dreams of homeownership. This is a goal toward which many Americans have been working their entire adult lives, so even a hiccup of four or five years might not be enough to make them give up the ghost.
The fact that all these conditions are now coming together in such a way as to be more conducive to their actually being able to buy is therefore likely to spark some good feelings and potentially a big step toward a housing market that more resembles pre-recession norms.