Real estate is affected by many different things. Home prices, affordability, rates and inventory all play a part, and recently the government shutdown has also taken its toll on the sector.
Despite more positive trends - like a dip in the number of foreclosed houses nationwide and declining mortgage rates - the current situation in Washington, D.C. may have the most drastic effect on the overall housing market. Other changes to the mortgage industry and lending regulation might also impact how buyers and sellers approach the entire process.
Mortgage lending regulation adapting
New rules for the mortgage industry are set to take hold in the beginning on 2014, according to The Wall Street Journal. These changes will force some buyers to switch up how they both enter and view the housing market, but overall the shifting regulation is designed with consumers' best interests in mind.
On Jan. 10, the lending regulation set forth by the Consumer Financial Protection Bureau will go into place, the news source reported. The rules are intended to improve lending practices, and potentially stop behavior that led to the real-estate bubble several years ago. More strict standards will be used, and lenders are advised to underwrite qualified mortgages that fit, instead of other, less ideal ones.
This could change how borrowers and real estate agents move through the steps. Lenders will soon need to be more careful about who they give out mortgages to, which means every minute detail of the buyer's finances will be scrutinized.
"From an industry perspective, most lenders are going to say, 'If I'm going to take on additional risk, I need to be even more careful who I lend to,'" Tom Wind, executive vice president of residential and commercial lending at EverBank, told the news source.
Borrowers with a large net worth are the ones who may feel the pinch from the shift in lending regulation the most, WSJ reported. The reason is because these people may have been with one bank for a long time, and developed a relationship and more freedom than first-time borrowers would have. Now, lenders have to be careful about who they give mortgages to, regardless of history. Any who default could be sued by borrowers.
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Mortgage rates continue to drop
While the government shutdown has caused professionals all across the U.S. to take watch, one area that could soon feel a change is the mortgage industry.
At the moment, mortgage rates are maintaining a steady decline, now at three consecutive weeks, according to Freddie Mac's Primary Mortgage Market Survey. However, the government at a stand-still could drive consumer sentiment lower and affect how rates trend in the future.
Currently, the 30-year fixed-rate mortgage is at 4.22 percent for the week of Oct. 3, the government-sponsored enterprise reported. That is lower than last week's 4.32 percent.
"With the onset of the federal government shutdown and declining consumer confidence, fixed mortgage rates fell for the third consecutive week," said Frank Nothaft, vice president and chief economist for Freddie Mac. "Consumer sentiment fell for the second month in a row in September to its lowest reading since April, according to the University of Michigan. Moreover, a recent Bloomberg survey of professional forecasters suggests that a partial federal shutdown lasting one week would shave 0.1 percentage points off of GDP growth in the fourth quarter and even more if the shutdown lasts longer."
The government shutdown has the ability to drastically alter the real estate market, which means many people will keep an eye on its progress, hopefully with a quick resolution in the near future.