Thirty-year fixed-rate mortgages crossed below the 3% threshold—not only the second time this month but also the second time on record, Freddie Mac reports.
“It’s Groundhog Day in the mortgage market as rates continue to remain near historic lows, driving purchase demand over 20 percent above a year ago,” says Sam Khater, Freddie Mac’s chief economist. “Real estate is one of the bright spots in the economy, with strong demand and modest slowdown in home prices heading into late summer. Home sales should remain strong the next few months into the early fall.”
Lawrence Yun, chief economist of the National Association of REALTORS®, predicts that mortgage rates are likely to fall further over the next few weeks since the 10-year Treasury yields—which rates follow—have retreated over the past few weeks. “The housing market is hot because of lower mortgage rates,” Yun says.
Freddie Mac reports the following national averages with mortgage rates for the week ending July 30:
30-year fixed-rate mortgages: averaged 2.99%, with an average 0.8 point, falling slightly from 3.01% average. The lowest average on record is 2.98%, which occurred in mid-July. Last year at this time, 30-year rates averaged 3.75%.
15-year fixed-rate mortgages: averaged 2.51%, with an average 0.7 point, dropping from last week’s 2.54% average. A year ago, 15-year rates averaged 320%.
5-year hybrid adjustable-rate mortgages: averaged 2.94%, with an average 0.4 point, dropping from last week’s 3.09% average. A year ago, 5-year ARMs averaged 3.46%.
Freddie Mac reports average commitment rates along with average fees and points to reflect the total upfront cost of obtaining the mortgage.
The U.S. homeownership rate surged to its highest level in 12 years in the second quarter as low mortgage rates and the pandemic prompt more Americans to want to have a home.
The homeownership rate rose to 67.9% in the second quarter, increasing even while the nation faced record levels of unemployment, the Census Bureau reported this week. A year ago, the homeownership rate was 64.1%, for comparison.
However, the Census Bureau cautioned that the data collection methods for the most recent quarter’s report may have affected the results. Due to the pandemic, researchers were unable to go door-to-door and conduct in-person interviews to verify information, but had to rely on the telephone.
Still, the results show young adults and minorities increasingly turned to homeownership in the second quarter.
The homeownership rate in the second quarter increased the most among those under the age of 35, increasing to 40.6%, compared to 37.3% the prior quarter.
The homeownership rate in the second quarter showed increases among all age groups.
The homeownership rate among Black Americans increased to 47%, the highest since 2008, according to the report. A year prior, the homeownership rate for Black households had fallen to its lowest rate on record.
The homeownership rate among Hispanics also posted an increase, reaching 51.4% in the second quarter, the highest since data going back to 1994, the Census Bureau reported.
The increase in the overall homeownership rate in the second quarter places it back to a level last seen before the housing crisis and the widespread foreclosures that followed the 2008 foreclosure crisis, Lawrence Yun, chief economist of the National Association of REALTORS®, told HousingWire.
“Usually, homeownership data moves at more of a glacier-slow pace, so to see a sudden move like this was quite surprising,” Yun says. “Some of this increase could be due to the change in data measurement.”
The Census Bureau noted that its change in collecting data due to the pandemic caused the survey’s response rate to be 12 percentage points lower in the second quarter compared to the first quarter.
Lower mortgage rates are also enticing more Americans to lay down some roots during the pandemic. Yun told HousingWire that lenders qualify applicants by the amount of the monthly payment measured against their income. When financing costs move lower, the payment shrinks.
“Record-low mortgage rates in mid-2020 will provide a further boost to homebuilding, and it could be that families are more interested in homeownership because of the pandemic,” PNC Financial Services said in a research note last week.
In mid-July, the 30-year fixed-rate mortgage dipped below 3% for the first time, Freddie Mac reported.
Alphabet Inc.’s Google, Apple Inc., and other major tech companies pledged over the past year to invest hundreds of millions of dollars to increase the supply of affordable housing in their communities. The tech industry has been blamed as a major culprit for housing shortages in Silicon Valley and Seattle. Tech companies are renewing their vow to fix it, even during the COVID-19 pandemic.
Google announced last week that its first round of $115 million has been deployed of its total $1 billion commitment. About $100 million has gone to housing developers and an investment in a modular-housing company, Factory_OS, to help build a second housing factory. Google, based in Mountain View, Calif., says it expects its investments to generate about 24,000 new units of affordable housing by 2029.
Apple announced last week that it has allocated the first $400 million of the $2.5 billion pledge it announced in 2019 to go toward affordable housing. It will create loans for affordable housing developments and is also working with the California Housing Finance Agency to provide down payment and mortgage assistance to hundreds of first-time buyers.
Microsoft Corp., based in Seattle, pledged $750 million to affordable housing, and Facebook Inc., based in Menlo Park, Calif., has said it’ll devote $1 billion.
Companies like Apple, Google, and Facebook are also donating their own land to build developments to include more housing.
After years of rising housing costs in the tech homes, home buyers have been priced out. For example, new jobs were outpacing housing supply in all of the Bay Area’s nine counties between 2011 and 2017.
“We’re not going to solve the entire housing affordability problem through philanthropic dollars from large tech companies,” Sarah Karlinsky, senior adviser at SPUR, a public policy think tank, told The Wall Street Journal. She says state and local policies will also be an important piece. “It’s certainly great that they’re taking it seriously, but the amount of money that’s needed is going to be significant.”
Despite high unemployment numbers, nearly two-thirds of buyers recently surveyed say they’ve been able to save more money for their down payment due to the shelter-in-place orders this spring. Combined with low interest rates (the 30-year fixed-rate mortgage averaged 2.98% last week), more house hunters say they’re stretching their budgets and searching for larger homes in pricier neighborhoods this summer, according to a new survey from realtor.com®, reflecting responses from 2,000 consumers who plan to purchase a home in the next 12 months.
Thirty-eight percent of home buyers recently surveyed say they have increased their target price range since starting their home search. Further, 41%of buyers say they are looking to buy sooner because of the COVID-19 pandemic.
“While the health and economic impact [from the COVID-19 pandemic] has been significant, the U.S. housing market has remained surprisingly resilient, and consumers continue to view home ownership as the foundation of the American dream,” says George Ratiu, realtor.com®’s senior economist. “Home buyers remain steadfast in the main attributes they seek–three bedrooms, two bathrooms, and a garage. However, the quarantine has made people rethink where and why they want a new home.”
Indeed, garages are becoming more popular. Buyers called garages one of the most important home features, according to the survey. Also, renovated kitchens and large backyard spaces ranked among the top features buyers wanted in both the spring and summer surveys. Also, 84% of buyers say they are looking for a move-in ready home.
Longer commutes may not be a deal breaker either. As remote work options have changed the daily patterns for many, some buyers are showing more willingness to live farther away from their workplaces. Nine percent of consumers say they are willing to commute over an hour, compared with 3% who said they’d be willing to commute that far earlier this spring.
Existing-home sales rebounded at a record pace in June, following three consecutive months of sales declines, the National Association of REALTORS® reported on Wednesday. Each of the four major regions of the U.S. posted month-over-month increases in June, with the West posting the largest jump.
Total existing-home sales—completed transactions that include single-family homes, townhomes, condos, and co-ops—increased 20.7% from May to a seasonally adjusted annual rate of 4.72 million in June, NAR reports. Sales, however, are still down 11.3% from a year ago.
“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” says Lawrence Yun, NAR’s chief economist. “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”
Housing inventories, a big obstacle for buyers before the pandemic, have tightened further. Inventory levels in June fell 18.2% compared to a year ago, NAR reports. The low inventories continue to press on home prices. NAR pegs current inventory to be 4.0 months, down from 4.3 months one year ago.
“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply,” Yun says.
Here are more key indicators from NAR’s latest housing report:
Home prices: The median existing-home price was $295,300 in June, up 3.5% from a year ago. Prices rose in every major area of the U.S. in June.
Days on the market: Sixty-two percent of homes sold in June were on the market for less than a month. Properties typically remained on the market for 24 days in June, down from 27 days in June 2019.
First-time buyers: First-time home buyers comprised 35% of sales in June, up from 34% in May but about equal to June 2019.
Investors and second-home buyers: Individual investors or second-home buyers purchased 9% of homes in June, down from 14% in May and 10% in June 2019. Investors and second-home buyers tend to make up the bulk of cash sales. All-cash sales in June accounted for 16% of transactions in June, down from 17% in May but equal to 16% in June 2019.
Distressed sales: Foreclosures and short sales comprised 3% of sales in June, about even with May but up from 2% in June 2019.
Regional Breakdown
Here’s how existing-home sales fared across the country in June:
Northeast: Existing-home sales increased 4.3% last month, reaching an annual rate of 490,000—a 27.9% decrease from a year ago. Median price: $332,900, up 3.6% from June 2019.
Midwest: Existing-home sales rose 11.1% to an annual rate of 1,100,000 in June, down 13.4% from a year ago. Median price: $236,900, a 3.2% increase from June 2019.
South: Existing-home sales increased 26% to an annual rate of 2.18 million in June, down 4% from a year ago. Median price: $258,500, a 4.4% increase from a year ago.
West: Existing-home sales increased 31.9% to an annual rate of 950,000 in June, a 13.6% decrease from a year ago. Median price: $432,600, up 5.4% from June 2019.
Mortgage rates increased for the first time in weeks, but rates remain near historical lows.
The 30-year fixed-rate mortgage shattered records last week, averaging 2.98%. This week, they increased slightly to a 3.01% average, Freddie Mac reports. “While housing demand continues to rebound, the month-long swoon in economic activity has caused the 10-year Treasury benchmark to drop,” says Sam Khater, Freddie Mac’s chief economist. “In the short term, this means the demand will continue on the back of near-record-low mortgage rates. However, the most recent consumer spending data has been pointing to slow growth since mid-June. The concern is that the pause in economic activity will cause unemployment to remain elevated, which will lead to longer-term labor market distress.”
Freddie Mac reported the following national averages with mortgage rates for the week ending July 23:
30-year fixed-rate mortgages: averaged 3.01%, with an average 0.8 point, rising slightly from 2.98%. Last year at this time, 30-year rates averaged 3.75%.
15-year fixed-rate mortgages: averaged 2.54%, with an average 0.7 point, increasing from last week’s 2.48% average. A year ago, 15-year rates averaged 3.18%.
5-year hybrid adjustable-rate mortgages: averaged 3.09%, with an average 0.3 point, up from last week’s 3.06% average. A year ago, 5-year ARMs averaged 3.47%.
Freddie Mac reports average commitment rates, along with average fees and points, to reflect the total upfront cost of obtaining a mortgage.
Mortgage applications have been on the rise in the last few weeks, and a housing report from the National Association of REALTORS® on Wednesday finally saw that translate into higher sales—in a big way. NAR reported that existing-home sales surged to a record pace in June, increasing nearly 21% compared to May.
For the ninth consecutive week, mortgage applications posted annual gains, and those increases are widening too. This signals that the rise in sales will likely continue.
Mortgage applications for home purchases rose 2% over the previous week and are 19% higher than a year ago, the Mortgage Bankers Association reported Wednesday. The year-over-year gains last week in applications for home purchases widened over previous weeks, too.
Record low mortgage rates last week may be prompting more home buyers to house hunt. The MBA reports the average contract interest rate for a 30-year, fixed-rate mortgage last week was 3.2%. Freddie Mac reported last week that the national average for the 30-year mortgage rate was 2.98%, an all-time low. Borrowers with stellar credit are snagging rates below 3%, lenders say.
Homeowners are also looking to lower their monthly payments by refinancing. Refinance applications increased 5% last week and are up 122% over the same week a year ago, the MBA reports. Nearly 60% of all outstanding loan balances have at least a half-percentage point incentive to refinance, says Doug Duncan, Fannie Mae’s chief economist.
The higher demand in mortgage applications is translating into sales. Besides an uptick in existing-home sales, homebuilders are also reporting a surge in buyer traffic.Single-family housing starts jumped 17.2% in June, the Commerce Department reports.
“The housing market is hot,” Lawrence Yun, NAR’s chief economist, said in a recent statement. “Home buyers have swiftly moved into the market to take advantage of the unimaginably low mortgage rates.”
However, a shortage of homes for sale, in both the existing- and new-home markets, may limit sales due to rising buyer demand, economists say.
Don’t let your home buyers be caught off guard: They’re likely to face steep competition for the home they want. With a limited number of homes for sale and strong buyer demand, bidding wars are growing more commonplace.
A report from the brokerage Redfin shows that more than half of its offers—54%—saw multiple offers for homes in June. Single-family homes and townhouses were the most likely to receive multiple bids from buyers, moreso than condos, Redfin notes.
Bidding wars have been reportedly growing since May, as many states began to reopen after being mostly on lockdown during the initial onset of the COVID-19 pandemic.
“Bidding wars continue to be fueled by historically low mortgage rates and fewer homes up for sale than almost any time in the last two decades,” says Taylor Marr, Redfin’s economist. “It’s like a game of musical chairs where only the best bidders get a seat. Both renters and move-up buyers who have held onto their jobs are vying for the small number of single-family homes on the market as they realize they need more space for their families.”
Freddie Mac reported last week that the average 30-year fixed-rate mortgage for the week ending July 9 dropped to an all-time low of 3.03%. Buyers may be wanting to take advantage of the low financing costs, but finding a home to buy is becoming increasingly problematic. The number of homes for sale nationwide has plunged by more than 20% annually.
The most competitive markets for buyers in June were Boston, San Diego, and Salt Lake City, Redfin reports. Seventy-two percent of offers faced competition in Boston in June. “This is the most competitive real estate market I can remember,” says James Gulden, a Boston Redfin real estate professional. “There are multiple bids on nearly every property I see, whether I’m representing the buyer or the seller. I’m seeing the most competition in the suburbs, where homes are selling in a matter of days. Sellers don’t want homes to be on the market any longer than necessary because of COVID-19, so they’re setting offer deadlines, which create a frenzied, competitive atmosphere.”
The metros Redfin tracked with the most bidding wars in June and the share of offers that faced bidding wars were:
Sales of newly built homes surged 55% year-over-year in June—the highest pace of sales growth in homebuilding since the housing boom back in 2005 and 2006, according to new data from John Burns Real Estate Consulting. The firm’s data tends to mirror U.S. Census Bureau reports.
With a limited number of existing homes for sale, homebuilders are finding more buyers turning to them for options. This latest housing boom is being entirely driven by the coronavirus pandemic, CNBC reports.
“The anecdotal evidence is overwhelming,” John Burns, founder and CEO of John Burns Real Estate Consulting, told CNBC. “Sales in the distance commuter areas are the most robust. I believe a lot of computer-oriented people have proven to their co-workers that they can be productive from home, and have sensed, or officially been given the green light, to work from home at least a significant portion of the time after a vaccine has been found.”
Homebuilder Taylor Morrison reported last week a 94% annual jump in its June sales, a record high.
New-home sales are reportedly the strongest in the Northeast, an 86% annual increase, according to John Burns Real Estate Consulting data. Florida is also seeing new-home sales rapidly increasing, up 84% annually.
As demand increases, so do home prices. About 57% of homebuilders surveyed by John Burns Real Estate Consulting said they had increased their home prices. In June, home prices on new construction were about 4.5% higher annually.
Many builders had stopped construction in March, originally predicting a massive slowdown when the pandemic first struck the U.S. Now they’re quickly trying to ramp up production to meet the unexpected surge in demand.
Americans have been on the move for more reasons than just to snag record low mortgage rates, shows a new survey of 2,000 real estate agents from HomeLight, a company that provides software and services to the real estate industry, a company that provides software and services to the real estate industry. The survey was conducted in a series of seven separate polls from April to the end of June.
The top moving motivators cited include the need for space (44%), a desire to buy versus rent (41%), and to relocate to the suburbs (37%).
The home office is also taking front and center as a prime home feature attracting buyers, agents reported in HomeLight’s Q2 2020 Top Agent Insights report. As remote work grows more common, home buyers need a formal home office. Designated home offices were the top feature in demand among home shoppers, followed by a home in a less dense location, single-family living, a private and spacious outdoor area, and a well-appointed kitchen, the survey shows.
“Prior to the pandemic, many viewed their homes as landing pads, a place to change clothes and rest before they were off on the next trip, the next social outing, the next go-go-go adventure,” the report notes. “Quarantine provided a chance, for better or worse, to experience our homes full time and with new purpose.”
For homeowners wanting to add a home office onto their existing space, they’ll likely spend, on average, $12,000. However, the home office can recoup 87% of that spend at resale, according to HomeLight. Another remodeling project that can recoup the most at resale: Walk-in pantries (a 76% ROI of its average $3,400 cost).
