At a time when the pandemic has shaken the economic structure of the country, the mortgage industry is doing rather well. Low-interest rates have resulted in aggressive buying and refinancing. This has brought a wide smile to the faces of mortgage-industry lenders. There is, however, fear of being overexposed if the economy goes into a slowdown.

Banks are hiring and upgrading

Several banks are recruiting lenders and shifting to digital platforms. Banks including, but not limited to,  Comerica, KeyCorp, and Atlantic Union Bankshares, are optimistic about the real estate and the mortgage industry and hence the hiring. Almost all of them have a robust pipeline. The challenge is not likely to come up in 2020. However, when the market decelerates in 2021, lenders may be forced to bring down their standards of underwriting. Those who do not relax the terms will find lesser borrowers visiting them, thus rendering them badly leveraged. The problem can be related to overexposed banks during the Subprime crisis. This makes “relaxing the underwriting” a tablet that the lenders can neither swallow nor vomit. 

Fannie Mae is optimistic

According to Fannie Mae, the $2.4 trillion forecast for refinancing will make it the highest figure for over 17 years. Purchase volume forecast to the tune of $3.9 trillion is unprecedented, too. New home sales, says Fannie May, is likely to rise by 14% on the yearly chart. Existing home sales should plateau, given the inventory shortage in chief real estate markets. Notably, as many as 14 out of 17 policymakers of the Fed Reserves assume that the rates aren’t likely to grow tall on the market till 2023. 

Move towards the suburban market

Among the interesting real estate trends is the move towards suburban markets. Not only are people moving because the cities are at the eye of the Corona storm but also because they expect the work-from-home routine to continue. And when employees won’t need to commute to city centers, they will be likely to go for attractive, moderately priced suburban homes. 

Russell Hughes, an analyst for Trepp, a data firm, believes that “Until rates move back up, there is a lot of wind in the sales” of the mortgage industry. I just don’t see things slowing down anytime soon unless there’s some serious new shock to the economy.”

What Hughes interprets as an “interest in investing in real estate” is clearly manifest in the bidding wars. It is no mean feat that more than half the listed properties are undergoing such pricing wars. This is the direct aftermath of buyer behavior. For 3-4 months, the buyers had been really apprehensive, not really sure which way to take during Corona- the bullish road or the bearish. Over the last 3 months, however, they have started looking at the ‘opportunity’ which every adversity presents. With buyers as aggressive as they are, sellers have also been coming out in greater numbers than expected. Let’s not forget, we had seen sellers not even going for open houses and this wasn’t that long ago.