2014 Housing Market Trends Leave Lenders with Mixed Signals
Overall, 2014 has been a strange year for American housing market trends. While many analysts expected the market to steadily improve, the results have been mixed. As we approach the end of the year, there are a few housing market trends that lenders should keep in mind as they strategize for 2015 and beyond.
Construction spending is flat
After some signs of life earlier in the year, construction spending has flattened out. The latest data shows that total construction spending fell by 0.8 percent from July to August of this year. Construction spending is still up 5 percent compared to August 2013, but this discouraging data could be a sign that the recovery is running out of steam. Lenders should be cautious of the decreasing momentum in the market and prepare for this pace to continue.
Mortgage applications continue to fall
One of the more disappointing housing market trends is the decreasing number of mortgage applications. The total count of applications for new mortgages and refinances has declined in the later half of September. This has been an ongoing trend throughout the year. The optimism from high application rates at the end of 2013 has steadily deflated throughout 2014. Between this and lower construction spending, lenders should prepare for business to remain slow as housing market trends neglect to show signs of recovery.
VA loans continue to grow
One of the housing market trends that continues to remain strong is the VA market. Throughout the year, there has been an increase in both new home purchases and refinances through the VA program. These loans have expanded every year over the past seven years — even after the housing bubble crashed. Demand for these loans continues to grow as veterans return from overseas. Government support for the program has made qualification for these loans easier than traditional loans. These factors make it seem likely that VA loans will continue to grow moving forward. Lenders should target this market, if they haven’t already, to help offset possible losses in other areas.
Overall, 2014 has been a disappointment for the housing market. Unfortunately, these trends fail to predict improvement on the immediate horizon. But with the growth of VA loans and the potential for higher interest rates around the corner, lenders should keep this advice in mind and restructure their strategies to prepare themselves for 2015.