As summer approaches, thoughts turn to warm weather and outdoor fun.
But this year they may not turn to purchasing a new home, according to analysts who follow the real estate and credit union industries.
"Mortgage rates are still very low," Greg McBride, CFA, Bankrate.com's chief financial analyst, said. "Rents continue to rise. Home affordability is enticing."
Recommended For You
Bankrate is a New York City-based consumer financial services company.
At the same time, household incomes remain stagnant and home buyers are reluctant to go shopping until they see an increase in their paychecks, McBride said.
Still, there are opportunities for credit unions in the mortgage space. Families with college-age students may need money to pay tuition, according to Michael Moebs, economist and CEO for Moebs $ervices, a Lake Forest, Ill.-based economic research firm.
"The home equity [loans] and second mortgages are not things to shy away from," he said.
Low interest rates could result in a better mortgage lending summer for credit unions, Brian Turner, president of Meridian Economics, a Plano, Texas-based firm, said.
"The encouraging news is that 2016 spring and summer purchase applications are expected to be greater than in 2015," Turner said. "This outlook is supported by recent shifts in mortgage financing costs that show the average rate for a 15- and 30-year fixed rate mortgage loan has fallen over the past 12 months from 3.52% and 4.22% to 3.26% and 3.88%, respectively."
Moebs said more people who own one home are considering the purchase of a second home or condominium.
And it's still a seller's market, Moebs said. Indeed, RealtyTrac recently reported home sellers sold their homes in March for $30,500 more than they purchased them for, representing a 17% gain, the largest since December 2007.
Moebs said if the home buying market remains weak, credit unions may loosen their underwriting standards, which would be a mistake, he said.
"Let's not get too aggressive in it," he said.
Turner agreed, stating credit unions should be patient and not increase risk.
"The industry struggles not only from moderately weak loan demand but also relatively low interest rates," he said. "Even if demand explodes over the next couple of quarters, it still provides relatively low total return for taking on the credit risk that remains in question for at least another two quarters."
Therefore, credit unions should not take on more risk in an effort to immediately increase revenue.
"Credit unions should tip the balance of risk as to protect credit exposure rather than incremental revenues from discounted quality until market rates begin to shift upward later this year or in early 2017," Turner said.
Read more about economists' summer 2016 lending forecast in the May 11, 2016 print issue of Credit Union Times.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
