Young Americans are rushing to become homeowners in the pandemic. While the overall homeownership rate dipped slightly in the third quarter from the previous quarter’s high, it continues to grow among those under the age of 35. Americans in that category had a homeownership rate of 40.2% last quarter, up from 37.5% a year earlier, according to newly released U.S. Census Bureau data.
Competition in the housing market has accelerated during the pandemic, and record-low mortgage rates are offering some relief from higher home prices. First-time buyers made up 31% of home sales in September,according to the National Association of REALTORS®.
The homeownership rate among those 35 to 44 years old also increased, rising more than three points to 63.9% in the third quarter. Other age groups have the following ownership rates: 72.0% for those ages 45 to 54; 76.4% for those 55 to 64; and 80.7% among those over age 65.
Despite the gains among some age groups, the U.S. homeownership rate in the third quarter still dropped overall to 67.4%, a 0.5% decrease from the second quarter’s highest rate since 2008. Still, the homeownership rate is up from 64.8% a year earlier.
All four major regions of the U.S. saw an increase in annual increases in homeownership rates in the third quarter. Homeownership rates are highest in the Midwest and South at 71.2% and 70.8%, respectively. Meanwhile, homeownership rates are lowest in the Northeast and West, both at 62.0%.
The racial gap in homeownership is concerning, housing analysts note. Non-Hispanic whites have a homeownership rate of 75.8% compared to a 46.4% rate among Blacks, 50.9% among Hispanics, and 61.0% among Asian, native Hawaiian, and Pacific Islanders, census data shows.
Homeowners are watching their home values climb significantly this year, and prices are expected to continue to appreciate over the next decade. The National Association of REALTORS® reported that the median existing-home price for all housing types in September was $311,800—a 14.8% increase compared to a year ago.
But how high are prices poised to go over the next decade? A new study shows that home prices in the U.S. have increased by nearly 49% in the past 10 years. If they continue to climb at similar rates over the next decade, U.S. homes could average $382,000 by 2030, according to a new study from Renofi, a home renovation loan resource.
To estimate property prices in 2030, Renofi analyzed the average price in every state and the 50 largest cities, comparing them from September 2010 to September 2020.
They found that home values differ considerably across the country.
For example, in Nevada, home prices have more than doubled since 2010, surging nearly 106%. On the other hand, home prices in Connecticut have averaged a 1.12% increase in that period.
Renofi also projected what 2030 home prices will be in each state. California is predicted to have the highest prices over the next decade. The average home price could top $1 million if prices continue to increase at their current growth patterns, Renofi says in its study.
The pandemic has not dampened home appreciation. In fact, high buyer demand is prompting home prices to surge. In the third quarter, the average home sale generated a gain of $85,000, up from $66,000 a year ago, according to data from real estate research firm ATTOM Data Solutions. That $85,000 translates to a nearly 39% return on investment compared to the original purchase price.
“Home prices and seller profits across the nation continue racking up new highs as the housing market remains relatively immune from the economic havoc caused by the coronavirus pandemic,” says Todd Teta, chief product officer at ATTOM Data Solutions. “It’s almost as if the housing market and the overall economy are operating in different worlds.” Record-low mortgage rates and declining inventory are prompting strong home prices and returns for home sellers, Teta adds.
ATTOM Data Solutions defines typical profit margins as the percent change between the median purchase and resale prices. The largest annual increase in profit margins occurred in the following metro areas in the third quarter, according to the report:
St. Louis: margin up from 22.4% to 37.1%
Columbus, Ohio: up from 37.1% to 51.6%
Salem, Ore.: up from 60.6% to 73.9%
Indianapolis: up from 32.7% to 46.0%
Akron, Ohio: up from 20.7% to 33.7%
Overall, profit margins remained highest in Western markets. The largest profit margins nationwide were in:
As October began, homebuilding starts were up more than 8% compared to a year ago. But that increase in new homes on the market is still not enough to meet demand, says Lawrence Yun, chief economist of the National Association of REALTORS®. Housing starts in September were at a 1.42-million-unit production level on an annualized basis, but Yun says the annualized number of permits, 1.55 million homes, will better meet housing demand. Permits are considered to be a leading sign of the number of starts.
Rising lumber prices and a shortage of construction workers continue to constrain homebuilding, Yun said.
Still, September’s homebuilding pace was the highest pace for single-family starts since June 2007, according to the National Association of Home Builders. Starts in the multifamily sector, which includes condos and apartments, continue to struggle amid the pandemic, plunging 16.3% last month to a pace of 307,000.
“The housing market remains a bright spot in the U.S. economy, and that is reflected in the positive housing starts report,” says Chuck Fowke, chairman of the NAHB. “Builder confidence is at an all-time high as buyer traffic is strong—another sign that housing is helping to lift the economy.”
On a regional basis, combined single-family and multifamily housing starts from January through September were highest in the Midwest, an 11% increase, followed by a 5.7% gain in the South and a 4.5% increase in the West. Homebuilding was down 1.4% in the Northeast, the Commerce Department’s data shows.
New-home construction likely will stay elevated over the months to come. “Home sales have exceeded for-sale construction recently, which means additional homebuilding in the near term,” says Robert Dietz, the NAHB’s chief economist. “Demand is being supported by low interest rates, a suburban shift in demand, and demographic tailwinds. However, headwinds due to limited building material availability is slowing some construction activity despite strong demand, with authorized but not started single-family homes up 22.4% compared to a year ago.”
The 30-year fixed-rate mortgage hit its 11th record of the year this week, averaging 2.80%—the lowest rate ever recorded by Freddie Mac.
“Mortgage rates remain very low, providing homeowners who have not already taken advantage of this environment ample opportunity to do so,” says Sam Khater, Freddie Mac’s chief economist. “Mortgage rates today are on average more than a full percentage point lower than rates over the last five years. This means that most low- and moderate-income borrowers who purchased during the last few years stand to benefit by exploring refinancing to lower their monthly payment.”
The low loan rates are fueling a hot housing market as buyers rush to lock in the rates. In September, existing-home sales jumped 21% compared to a year ago, the National Association of REALTORS® reported this week.
Freddie Mac reports the following national averages for mortgage rates for the week ending Oct. 22:
30-year fixed-rate mortgages: Averaged 2.80%, with an average 0.6 point, dropping from last week’s previous all-time low of 2.81%. Last year at this time, 30-year rates averaged 3.75%.
15-year fixed-rate mortgages: Averaged 2.33%, with an average 0.6 point, dropping from last week’s 2.35% average. A year ago, 15-year rates averaged 3.18%.
5-year hybrid adjustable-rate mortgages: Averaged 2.87%, with an average 0.3 point, falling from last week’s 2.90% average. A year ago, 5-year ARMs averaged 3.40%.
Freddie Mac reports average commitment rates along with average points to reflect the total upfront cost of obtaining a mortgage.
Single-family homeowners with FHA-insured mortgages who are struggling financially amid the pandemic now have through Dec. 31 to submit an initial forbearance request. The U.S. Department of Housing and Urban Development announced this week that it’s extending the deadline, originally set for Oct. 30, for those needing to make an initial COVID-19–related forbearance request to their lender.
The change puts FHA’s forbearance actions in line with its extended foreclosure moratorium, which expires Dec. 31.
“By providing this important extension, FHA seeks to assist those struggling with the continued financial effects of the COVID-19 pandemic,” said Dana Wade, HUD assistant secretary for housing and federal housing commissioner, in a statement. “Our goal is to make sure that no homeowner loses their home unnecessarily as a result of this pandemic.”
For homeowners who request it, the FHA requires lenders to provide up to six months of COVID-19 forbearance. Six more months can be added for homeowners who request an extension from that initial forbearance.
About 400,000 homeowners are “needlessly delinquent,” said Urban Institute researchers Laurie Goodman and Michael Neal in a report earlier this month. These homeowners are eligible for forbearance but have not taken it. This has led to a growing number of homeowners who are delinquent on their mortgages but don’t need to be, the report notes.
HUD stresses that homeowners who can still make their mortgage payments should continue to do so, but there are options for those who can’t. “For those who are struggling right now, we urge them to engage with their servicer immediately,” says Joe Gormley, HUD’s deputy assistant secretary for single-family housing. “And if your servicer contacts you, it is crucial that you respond to them to let them know if you need assistance. The last thing FHA wants is for any homeowner to risk losing their homeownership investment if they are eligible for assistance.”
Real estate professionals can help educate at-risk borrowers about mortgage forbearance options. The National Association of REALTORS® offers at realtorparty.realtor a downloadable brochure called Protect Your Investment that outlines what homeowners should ask lenders about their options and payback requirements when considering forbearance.
You can also direct clients to a video, produced by the Consumer Financial Protection Bureau and HUD, that helps homeowners understand and explore their options for forbearance. It’s available through HomeownershipMatters.realtor or at the CFPB website.
As for relief efforts in the rental market, the Centers for Disease Control and Prevention used its authority in the name of public health in September to place an eviction moratorium to prevent landlords from evicting certain renters nationwide for the remainder of the year. NAR has strongly urged Congress and the Trump administration to approve rental assistance so the moratorium doesn’t lead to a cascading housing crisis in which housing providers face delinquencies and tenants face ever-increasing back payments on rental units. Read more about NAR’s efforts.
Home sales and home prices are increasing by double digits, with homes flying off the market in record time. Existing-home sales increased for the fourth consecutive month in September, up nearly 21% compared to a year ago, the National Association of REALTORS® reported on Thursday. All major regions of the U.S. saw month-over-month and annual gains in September. The Northeast experienced the largest increase in home sales.
“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” says Lawrence Yun, NAR’s chief economist. “I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”
Total existing-home sales—completed transactions that include single-family homes, townhomes, condos, and co-ops—increased 9.4% from August to a seasonally adjusted annual rate of 6.54 million in September, NAR’s index shows.
Home prices continued to surge amid strong buyer demand for housing. The median existing-home price for all housing types in September was $311,800—a 14.8% increase from a year ago ($271,500). Home prices in every region were up last month, NAR reports.
Homebuyers continue to face scant choices. Total housing inventory at the end of September was 1.47 million units, which is down 19.2% compared to a year ago. Unsold inventory sits at a 2.7-month supply at the current sales pace.
“There is no shortage of hopeful, potential buyers, but inventory is historically low,” Yun says. “To their credit, we have seen some homebuilders move to ramp up supply, but a need for even more production still exists.” (Read more: Homebuilding Is Booming, But Is It Enough?)
“The uncertainty about when the pandemic will end, coupled with the ability to work from home, appears to have boosted sales in summer resort regions, including Lake Tahoe, Mid-Atlantic beaches (Rehoboth Beach, Myrtle Beach), and the Jersey shore areas,” Yun says.
Here are additional indicators from NAR’s latest housing report:
Days on the market: Seventy-one percent of homes sold in September were on the market for less than a month. Properties typically stayed on the market for just 21 days last month—an all-time low. That is down from 32 days a year ago.
First-time buyers: First-time homebuyers made up 31% of sales in September, down from 33% a year ago.
All-cash sales: All-cash sales accounted for 18% of transactions in September, up from 17% in September 2019. Individual investors and second-home buyers tend to make up the biggest bulk of all-cash sales. They purchased 12% of homes in September.
Distressed sales: Foreclosures and short sales represented less than 1% of sales in September, which is down from 2% a year ago.
Mortgage rates: The 30-year fixed-rate mortgage continued to set records, decreasing to a 2.89% average in September. Last year, the average 30-year fixed-rate mortgage was 3.94%.
Regional Breakdown
Here’s how existing-home sales fared across the country in September:
Northeast: Existing-home sales jumped 22.9% compared to a year ago. Median price: $354,600, up 17.8% from September 2019.
Midwest: Existing-home sales climbed 19.8% compared to a year ago. Median price: $243,100, a 14.8% annual increase.
South: Existing-home sales rose 22.3% from September 2019. Median price: $266,900, a 13% increase from a year ago.
West: Existing-home sales surged 18.1% compared to a year ago. Median price: $470,800, up 17.1% from September 2019.
Paint firms are continuing to release a range of colors as their picks for the hottest hues of 2021. Benjamin Moore is the latest in announcing its choice: “Aegean Teal,” its top color pick for the new year.
The blue-green midtone, with gray undertones, is “rooted in the elegant, hand-spun textures of the home,” Benjamin Moore says. The color evokes a sense of comfort, craft, nourishment, and inspiration, the paint company says.
“Amid uncertainty, people yearn for stability,” says Andrea Magno, Benjamin Moore’s director of color marketing and development. “The colors we surround ourselves with can have a powerful impact on our emotions and well-being. Aegean Teal 2136-40 and the corresponding Color Trends 2021 palette express a welcoming, lived-in quality that celebrates the connections and real moments that take place within the home.”
Benjamin Moore’s 2021 color palette also reflects a range of colors expected to trend in the new year, including clays, peaches, whites, and grays.
Double-digit price increases for homes are not exactly what most people in real estate predicted to occur in a recession. But could low mortgage rates—the 30-year fixed-rate mortgage hit a record-low average of 2.81% last week—be partially to blame?
“The combination of what could be the lowest mortgage rates of our lifetimes, a paucity of inventory, and a desperate rush of buyers has resulted in median home list prices hitting new records,” realtor.com® reports.
Home prices were 12.2% higher for the week ending Oct. 10 than they were a year ago, realtor.com® data shows.
“It’s unprecedented for us to get a massive run-up in home prices during a recession,” says Sam Khater, Freddie Mac’s chief economist. “It’s clear that [mortgage] rates matter even more than unemployment rates.”
Low mortgage rates are helping buyers afford higher home prices, and they’re creating a buying frenzy in the housing market to lock in such low rates. Home buyers purchasing a median-priced home at about $350,000 still pay about $80 less than if they purchased a median-priced home of $315,000 last year at a higher interest rate average of 3.69%, a realtor.com® analysis shows.
Affordability goes up with low mortgage rates. However, home buyers do need a higher down payment as prices rise.
High home prices with high mortgage rates, on the other hand, is not a good combo, housing analysts point out. Ali Wolf, chief economist of Zonda, told realtor.com® that if mortgage rates go up by even a half-point, hundreds of thousands of buyers may no longer be able to purchase a home. First-time buyers, who tend to have smaller budgets, likely would experience the biggest repercussion.
But many economists are predicting mortgage rates to stay low in 2021. In the meantime, home prices likely will remain elevated because buyer demand remains high and inventories remain stretched thin.
Prospective home buyers are using short-term rentals as an opportunity to test out neighborhoods and cities before committing to a full relocation, according to data from Airbnb, a short-term rental network. The company reports a 128% increase from July to September over the same period last year in guest reviews that mention “relocation,” “relocate,” “remote work,” and “trying a new neighborhood.”
Airbnb guests are booking longer stays of two weeks or more in small and midsize cities with access to natural surroundings and wide open spaces. Some of the popular cities for Airbnb rentals are:
Park City, Utah
Truckee, Calif.
Steamboat Springs, Colo.
Durham, N.C.
Santa Fe, N.M.
Boise, Idaho
Richmond, Va.
Greenville, S.C.
Indianapolis
Fort Walton Beach, Fla.
Popular vacation days aren’t limited to the time surrounding holidays. Sixty percent of parents say they are very or somewhat likely to consider working remotely and traveling with their children if schools continue to be disrupted, according to a survey of about 1,000 U.S. adults commissioned by Airbnb. Also, 62% of people say they are interested in taking a vacation within driving distance of their current home.
