Dentist Home Loans

Through our experience working with thousands of dentist and other medical professionals we have gained a deep understanding of the unique challenges you will likely face while getting a home loan. We are here for any question you may have!

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Fairway Independent Mortgage Corporation

The gruelingly painful memory of the Great Recession has kept many would-be homebuyers sidelined as renters and many potential move-up buyers waiting to time the market before they make their move.

The current economic recovery is the longest on record and continues to climb a wall of worry and doubt. Many potential homebuyers continue to doubt the strength of the economy and housing market.

Fueling this skepticism are the many economic forecasts for a 2020 recession and pullback in housing. What might surprise you is that many of the economists that were calling for a recession in 2019 are now giving the all-clear signal for 2020. Here’s how Goldman Sachs sees it:

Goldman is not the only one forecasting a robust 2020; the National Association of Realtors, the Mortgage Bankers Association, Fannie Mae, and Freddie Mac all foresee increased numbers of home sales in 2020. This is largely due to near-record low unemployment, businesses paying employees more in wages, and attractive interest rates making mortgage payments more affordable than historical averages.

A strong economy and stock market, low unemployment, rising wages, and interest rates approximately half their historical averages all speak to the demand side of the equation. There’s no doubt demand should be strong in 2020.

What will happen to home values in 2020?

The answer to that question historically depends not only on demand, but also supply. As you can see in the chart below from the Federal Reserve Bank of St. Louis, housing supply nationally peaked at over a twelve-month supply of homes for sale during the Great Recession.

However, starting in 2004 and accelerating into 2005, housing supply surged strongly higher with far too few home buyers noticing the rise in housing supply.

Simply said — homebuilders became far too optimistic about the market and building drastically exceeded demand.

That is exactly the opposite of what we are seeing today in the United States. Today, inventory is actually moving lower, and we are currently near a record shortage for housing with only a 3.7-month supply of homes for sale nationally.

What other hidden risks could be lurking below the seemingly calm surface?

The real fuel for the last housing bubble was cheap and easy credit. In the run up to the Great Recession, loan quality suffered and eventually there was little to no documentation required to qualify for a mortgage.

In 2006, the Mortgage Credit Availability Index peaked above 800. The index tracks and scores how easy or difficult it is to qualify for a mortgage loan; the higher the number, the easier it is to qualify.

Since the Great Recession and for more than a decade, the score has stayed near historical lows, meaning it is still relatively difficult to qualify for a mortgage. Although qualifying for a mortgage loan today might require more documentation and effort, it means homebuyers in today’s market have to prove their ability to repay the loans and have a much lower chance of entering default and foreclosure.

As we might expect, we’re seeing homebuyers enter into the market earlier than seasonally expected. Typically, the winter months are slower and the homebuyer surge doesn’t hit until spring.

Not this year, however. So far we are seeing significantly more activity and purchase contracts than we have in the winter months in years past.

In fact, in the final four months of 2019, homebuyer traffic in listings for sale across the nation grew at the fastest pace in history. The surge in potential homebuyers from fall and winter 2018 to 2019 shows a wave of demand for housing in 2020.

CoreLogic has increased their housing forecast for 2020 and now estimates home prices will rise five percent nationally. This simply comes down to supply and demand as there is a significant shortage of housing inventory and a plethora of demand from homebuyers.

A five percent rise in home prices might not sound like much, especially since the S&P 500 stock index was up 28.9% in 2019. But keep in mind that, with real estate, you get the appreciation on the total sales price of the home and not just the amount you put down in the down payment.

For example, let’s say you bought a $250,000 home with 5% down ($12,500). If that home appreciated at 5% in 2020, your home equity would jump $12,500. That means you had a 100% return on your down payment and doubled your money

Conversely, if you invested your $12,500 in stocks and had a blockbuster year like we had in 2019 with a 28.9% return, your stocks only appreciated $3,612.50.

According to the Home Price Expectation Survey, there will be solid appreciation over the next five years resulting in the average $250,000 home being worth $297,500.

As this scenario plays out, keep in mind you not only have the appreciated home value as equity but also the principal you put down as a down payment and the amortization of your loan as you pay down the balance each month.

We’ve created a Total Cost Analysis to demonstrate the total equity a homebuyer would have in this scenario after five years. The numbers are compelling and you can see the analysis here: '); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank" >Total Cost and Equity Analysis

You can find the estimated home price appreciation for the state where you live below.

Many in the media have learned doom and gloom forecasts capture our attention and keep us coming back for more. The fundamentals of this market tell us a very different story. Housing is on remarkably solid footing and should continue to appreciate nicely in the months and years ahead.

If you would like more information on the steps to becoming a homeowner, please download our free Home Buyer Guide here: '); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank" >http://www.fairwayhomebuyerguide.com/

If you would like to learn more about our Dentist Home Loan Program, please visit https://fairwaydentisthomeloans.com/