Mortgage rates fell slightly this week, setting a new record low for the 10th time this year, Freddie Mac reports. The 30-year fixed-rate mortgage averaged 2.81%, the lowest rate since Freddie Mac began tracking such data in 1971. The previous all-time low, an average of 2.86%, was set in mid-September.
“Low mortgage rates have become a regular occurrence in the current environment,” says Sam Khater, Freddie Mac’s chief economist. “As we hit yet another record low, many people are benefiting, as refinance activity remains strong. However, it’s important to remember that not all people are able to take advantage of low rates, given the effects of the pandemic.”
But home buyers who are ready to enter the market are rushing to take advantage of lower borrowing costs. “With mortgage rates to remain near 3% for the next couple of years, homebuying activity is expected to stay strong for several more years,” Nadia Evangelou, a research economist for the National Association of REALTORS®, wrote on NAR’s Economists’ Outlook blog.
Freddie Mac reports the following national averages for the week ending Oct. 15:
30-year fixed-rate mortgages: averaged 2.81%, with an average 0.6 point, down from last week’s 2.87% average. Last year at this time, 30-year rates averaged 3.69%.
15-year fixed-rate mortgages: averaged 2.35%, with an average 0.5 point, falling from last week’s 2.37% average. A year ago, 15-year rates averaged 3.15%.
5-year hybrid adjustable-rate mortgages: averaged 2.90%, with an average 0.2 point, slightly falling from last week’s 2.89% average. A year ago, 5-year ARMs averaged 3.35%.
Freddie Mac reports average commitment rates, along with average points, to reflect the total upfront cost of obtaining a mortgage.
The pandemic has made Americans more interested in buying a second home. Online search traffic for vacation homes has reached a five-year high, according to a recent analysis by Point2Homes.com. Searches for houses for sale in popular second-home spots such as Big Sky, Mont., and Fort Bragg, N.C., are up 177% and 143% year over year, respectively.
Interest in second homes has more than doubled over 2019, according to Point2Homes.com. Google search terms like “buying a 2nd/second home” or “buying a vacation home” have significantly climbed since the onset of the COVID-19 pandemic. These search terms jumped 235% and 103% year over year in July and August, respectively.
Interest has particularly taken off in luxury destinations, Point2Homes.com notes in its study. Places such as Lake Tahoe, Calif.; Nantucket and Cape Cod, Mass.; and Jackson Hole, Wyo., are all seeing surging interest among buyers and are trending in Google searches.
“With interest rates on the floor and work-from-home slowly becoming work-from-anywhere, buying a second home or a vacation home makes more sense than ever,” Point2Homes.com notes in its study, tracking Google search trends. “As families have been forced to spend so much time within the four walls of their urban dwelling, vacation homes are becoming the best way to escape the pandemic-ravaged city life.”
As housing shortages deepen across the country, single-family zoning is increasingly becoming a prime target of lawmakers who seek to remake neighborhoods by adding density. Over recent years, some local and state governments—like Minneapolis and the state of Oregon—have essentially eliminated single-family zoning to make way for more types of housing in response to middle-class housing shortages. Other states, including Washington, Maryland, and Nebraska, also have introduced various forms of reform that target single-family zoning.
Wednesday, during the Urban Land Institute’s virtual conference, housing analysts and lawmakers pointed to single-family zoning as perpetuating segregation and inequality, leaving first-time buyers with fewer options and fostering an increase in homelessness.
For example, the majority of zoned land in California is reserved for single-family housing, said David Garcia, policy director at Terner Center for Housing Innovation at U.C. Berkeley, who spoke during the session “Legislating Density as a Solution to the Housing Crisis.” In Oakland, Calif., alone, 65% of residential zoning is reserved for single-family housing. That has left the state with a scarce number of lots to respond to its deficit of more than 3 million housing units.
Garcia cited research that shows if California eliminated single-family zoning and allowed fourplexes in more areas, then it could add 3 million new homes to meet the state’s housing needs.
However, the “not in my backyard” attitude held by established residents has long stood as a barrier to eliminating single-family zoning. Critics say adding more types of housing could add traffic to neighborhoods and potentially lower property values.
Accessory dwelling units, which are essentially another small home added onto an existing lot, are increasingly being built as a response to housing shortages. California permits the addition of ADUs on single-family lots, and that has fostered rapid expansion of the housing trend. Permits and the completion of ADUs in the state have more than doubled from 2018 to 2019.
But panelists at Wednesday’s session cautioned that ADUs are only be one piece of the puzzle to solve cities’ housing shortages. More land that has been zoned for single-family homes needs to be freed up to build on, they said.
“Single-family zoning caps out what you can build … We need to zone for enough housing,” Scott Wiener, a California state senator, said during the session. That would then allow for more housing in areas near transit and job hubs, and prevent greater sprawl, long commutes that plague roadways, the loss of farmland, and building in wildfire zones, he said. “We’re drunk on sprawl because it makes our lives easier,” he said. “Then we don’t have to have the difficult conversation about zoning in our existing communities where the jobs and transit are.”
Homelessness will continue to accelerate if states don’t do more to respond to housing shortages, Pinkston warned. “We need to solve the middle-income housing issue at scale or our homeless problem will grow astronomically,” she said.
A top pet peeve of homeowners: an old or outdated space in the owner’s suite bathroom. It has sparked a wave of renovations of the space, according to the 2020 U.S. Houzz Bathroom Trends Study, reflecting nearly 1,600 homeowners in the midst of or planning a remodeling project for an owner’s suite bathroom .
Nearly 90% of homeowners renovating an owner’s suite bathroom say they are changing the style as a way to bring it up to date, the study says. Insufficient storage, small showers, poor lighting, and limited counter space were the chief complaints about the spaces.
That’s likely why the main areas upgraded in an owner’s suite bathroom renovation tend to be showers, light fixtures, countertops, and vanity cabinets, the Houzz survey shows. Homeowners are seeking larger spaces. They’re increasing the size of their showers (54% of bathroom renovators), and 20% are increasing their bathroom’s overall size.
“We’re seeing that spending so much time at home is bringing a functional, beautiful bathroom to the top of the priority list for many homeowners,” says Liza Hausman, Houzz’s vice president of industry marketing. “They’re enlisting home professionals to bring bathrooms up to date with more current styles, and upgraded features like storage and lighting.”
Bathroom renovations aren’t cheap. The national median spend on a remodel is $8,000. Homeowners undergoing a major remodel of the space—including a shower update—are spending three times more than those doing minor remodels and leaving the shower as is, according to Houzz. (The median spend is $14,000 versus $4,500.) The size of the bathroom being upgraded is also affecting the budget. An owner’s suite bathroom that is larger than 100 square feet has a median spend of $7,000 more than a bathroom smaller than 100 square feet ($17,000 versus $10,000), according to Houzz.
Some overall trends emerging from the Houzz study:
White continues to be the top choice in bathroom colors, complete with white countertops and white walls.
Wall lights and recessed lights remain favorite lighting choices for bathroom remodels.
Installing a new mirror is a popular upgrade for remodeling homeowners, with most homeowners installing two or more mirrors. One in five homeowners also installed LED lighting in the mirrors, which has been a growing trend over the past year.
More than a third of homeowners added or upgraded an accent wall during their bathroom renovation. The top colors include white, gray, and blue. Fifty-one percent are using surface material to distinguish the accent walls.
Nearly half of all new faucets include high-tech features. A growing percentage of faucets offer one-touch-only or touch-free activation.
Shoppers seeking newly constructed homes are facing sharply increased prices as the cost of lumber has soared to record highs. Many buyers are finding themselves priced out of the new-home market, builders say.
Recent price spikes in lumber have added more than $16,000 to the typical cost of a new single-family home. The multifamily sector is also feeling the impact, with the typical apartment seeing an increase of more than $6,000, according to data from the National Association of Home Builders.
The increase has priced more than 2.1 million U.S. households out of the market for a median-priced new home, according to the NAHB.
Average lumber prices have increased by more than 170% since mid-April. They’ve reached a record high of more than $800 per 1,000 board feet, a common industry measure. Builders are advocating for lawmakers to take action to increase the supply and reduce the cost of lumber, saying lumber shortages could stress the housing market beyond its current state if too many buyers become priced out of the new-home market.
“Residential construction can lead the nation out of its current economic downturn, as it has during virtually every major economic disruption over the past five decades,” writes Chuck Fowke, NAHB’s 2020 chairman, in a column at BuilderOnline. “But it is vital that elected officials support policies that help America’s home builders gain access to reasonably priced building materials, particularly lumber.”
Millennial home shoppers are quickening their homebuying timelines due to the COVID-19 pandemic, according to a new survey by realtor.com® and HarrisX of 2,000 buyers. Born between 1981 and 1997, millennials make up the largest generation in U.S. history, and they are now very eager to buy, many surveys show.
“If there is a silver lining to the current economic landscape, it’s that mortgage rates are hanging around record lows,” says Danielle Hale, chief economist at realtor.com®. “With little to no equity to leverage, millennial home buyers tend to take out larger loans. Historically low rates are making this more manageable, even with rising home prices.”
Shelter-in-place orders helped many millennials who were able to keep their jobs to save for a down payment, Hale said, which is often one of the largest hurdles when buying a home. Sixty-eight percent of survey respondents said shelter-in-place orders helped them save for their down payment. “The combination of low rates and the opportunity to save is enabling many millennials to move up their homebuying timeline,” Hale says.
Of the three-fourths of the 2,000 millennial respondents who have been working remotely since the pandemic, 63% said they plan on purchasing a home because of their ability to work remotely.
Young adults are embracing more virtual options in their house hunt. The pandemic has prompted them to do even more of their home search online, perusing listing photos, videos, researching properties, and evaluating neighborhoods. Thirty-one percent of respondents said they are being more selective about the homes they decide to tour.
About a quarter of millennials surveyed say they’re tired of their current home and want room to increase the size of their family. More than half of the millennials surveyed said they are looking for a home below the U.S. median home price of $350,000, while 37% are looking for a home priced at more than $350,000. About half were looking for a home in their current city. The majority of millennials surveyed expressed a greater desire to move to the suburbs.
Home prices have hit a record-high growth of 12.9% over the last year. Yet the higher prices aren’t scaring buyers. Homes are still selling quickly—nearly two weeks faster than they did last year.
The U.S. median home price remained near its summer peak of $350,000 during the first week of October and has shown no signs of cooling, according to realtor.com®’s Weekly Housing Report, reflecting the week ending Oct. 3.
“While buyers would normally begin to hunker down this time of year, we expect to see an unusually high number remain in the market this fall,” says Danielle Hale, realtor.com®’s chief economist. “This gives sellers a rare opportunity to get top dollar for their home outside of the prime selling season, which may be motivating some to stay in the market. However, even with record-breaking prices, we’re not seeing sellers rush into the market with the same eagerness as buyers. Looking forward, a key question is whether this frenzied demand will continue into the spring or if we’ll see more balance between home buyers and sellers.”
Typically, during the fall months, sellers tend to lower their prices to entice a smaller pool of buyers. This year has bucked that trend, realtor.com® notes.
Inventories remain tight. The number of homes on the market has plunged 38% compared to last year. Sellers remain reluctant to list their homes.
Expect to see a greater mix of stucco, vinyl, and fiber cement siding as you travel around new-construction neighborhoods. Twenty-seven percent of new single-family homes in 2019 used stucco as their siding material, according to data from the U.S. Census Bureau’s Survey of Construction.
Vinyl siding was the second-most common option, at 25%, followed by fiber cement siding (such as HardiePlank or Hardie Board) at 21%. Only about 5% of new homes last year used wood or wood products, and 1% were clad in stone, rock, or other stone materials.
Stucco was the most commonly used siding material on new homes in the Pacific, Mountain, and South Atlantic regions last year. Fifty-seven percent of new builds in the Pacific region, which includes California, Washington, and Oregon, used stucco, followed by 52% in the Mountain region and 38% in the South Atlantic region.
Brick or brick veneer was most commonly used in the East and West South Central regions. Sixty-two percent of newly built single-family homes in the West South Central region, which includes Texas and Oklahoma, used brick or brick veneer.
Mortgage rates have remained below 3% for more than two months. And they likely aren’t going to drop much further, according to Freddie Mac.
“The yearlong slide in mortgage rates seems to be ending as rates have flattened over the last month and the economic rebound has slowed,” says Sam Khater, Freddie Mac’s chief economist. “But with near-record-low rates, buyer demand remains robust with strong first-time buyers coming into the market. The demand is particularly strong in more affordable regions of the country such as the Midwest, where home prices are accelerating at the highest rates over the last two decades.”
Freddie Mac reported the following national averages with mortgage rates for the week ending Oct. 8:
30-year fixed-rate mortgages: Averaged 2.87%, with an average 0.8 point, slightly falling from last week’s 2.88% average. A year ago, 30-year rates averaged 3.57%.
15-year fixed-rate mortgages: Averaged 2.37%, with an average 0.7 point, slightly up from last week’s 2.36% average. A year ago, 15-year rates averaged 3.05%.
Five-year hybrid adjustable-rate mortgages: averaged 2.89%, with an average 0.2 point, down from last week’s 2.90% average. A year ago, 5-year ARMs averaged 3.35%.
Freddie Mac reports average commitment rates along with average points to reflect the total upfront cost of obtaining the mortgage.
Pending home sales are exceeding pre-pandemic levels and defying forecasts. August marked the fourth consecutive month of escalating sales contract activity, with all four major regions of the U.S. posting higher year-over-year pending home sales numbers, the National Association of REALTORS® reported Wednesday.
NAR’s Pending Home Sales Index—a forward-looking indicator based on contract signings—increased 8.8% in August to a record high of 132.8. (An index reading of 100 is equal to the level of contract activity in 2001.) Contract signings are now 24.2% higher than a year ago.
“Tremendously low mortgage rates—below 3%—have again helped pending home sales climb in August,” says Lawrence Yun, NAR’s chief economist. “Additionally, the Fed intends to hold [its] short-term funds rates near 0% for the foreseeable future, which should, in the absence of inflationary pressure, keep mortgage rates low, and that will undoubtedly aid home buyers continuing to enter the marketplace.”
The housing market has made a strong recovery since the outbreak of COVID-19 first struck the U.S. this past spring, which led to a sudden downturn in sales. Yun says pending sales contracts are now at an all-time high. However, he cautions that won’t necessarily translate to a record number of home sales, because not all contracts lead to closings and there are sampling size variations. Yun also notes that the elevated sales likely are not sustainable due to ongoing inventory shortages of homes for sale.
“Home prices are heating up fast,” Yun says. “The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment.”
The metro areas where housing markets have seen the largest recovery or even exceeded their previous January levels, as of Sept. 19, are Seattle-Tacoma-Bellevue, Wash.; Las Vegas-Henderson-Paradise, Nev.; Boston-Cambridge-Newton, Mass.-N.H.; Denver-Aurora-Lakewood, Colo.; and Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md., according to realtor.com®’s Housing Market Recovery Index.
