The U.S. homeownership rate soared to an almost 12-year high in the second quarter as low interest rates allowed more Americans to qualify for mortgages.
The cheapest financing costs on record have widened the pool of people who qualify for mortgages, said Lawrence Yun, chief economist for the National Association of Realtors. Lenders qualify applicants by the amount of the monthly payment measured against their income, and when financing costs go down the payment shrinks.
“Lower rates always do a magic trick of bringing more buyers into the housing market,” Yun said in an interview.
The average U.S. rate for a 30-year fixed mortgage fell to an all-time low of 2.98% in mid-July, breaking the 3% threshold for the first time, according to Freddie Mac data. Last week, it was 3.01%, compared with 3.75% in the same week a year earlier.
The latest housing data offers a slightly disappointing consideration of mortgage applications, a more optimistic view of pending home sales, and a national homeownership rate that reached a height not seen in nearly 12 years.
The 9.5 percent plunge reflected the severe economic hit from the pandemic. Data released by the Commerce Department on Thursday is another reminder of the pain felt this year as the nation went into an economic shutdown.
The U.S. economy shrank 9.5 percent from April through June, the largest quarterly decline since the government began publishing data 70 years ago, and the latest, sobering reflection of the pandemic’s economic devastation.
The second quarter report on gross domestic product covers some of the economy’s worst weeks in living memory, when commercial activity ground to a halt, millions of Americans lost their jobs and the nation went into lockdown. Yet economists say the data should also serve as a cautionary tale for what is at stake if the recovery slips away, especially as rising coronavirus cases in some states have forced businesses to close once again.
The work-from-home requirements created during the coronavirus pandemic could have a significant impact of homebuying for the coming year, according to data from a new Realtor.com-HarrisX survey of active buyers.
In a June poll of 2,000 potential home shoppers who indicated plans to make a purchase in the next year, 63% of those currently working from home stated their potential purchase was a result of their ability to work remotely, while nearly 40% that number expected to purchase a home within four to six months and 13% said changes related to pandemic fueled their interest in buying a new home.
In recent months, a slew of cities and states have sought to forego single-family zoning in favor of higher density housing options—hoping it may be a cure for the ongoing affordability crisis.
From California to Oregon, North Carolina, Minnesota, and Virginia, legislation has been introduced and, in some cases, approved, all of it designed to allow for higher-density zoning in areas previously reserved exclusively for single-family housing. The move to higher-density zoning is seen, by some, as a way to alleviate affordability concerns amidst rising home prices.
The pandemic has sped up technology advancements
Zillow has launched self-guided, in-person tour options and digital floor plans on its site, creating a self-serve home-shopping experience for consumers.
With the self-guided tours, potential homebuyers and agents can use the Zillow app to unlock and tour an unoccupied home. This feature was piloted in Phoenix, where homes sold six days quicker, Zillow said.
The Federal Open Market Committee concluded its two-day meeting Wednesday and held interest rates steady, as expected.
“Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year,” the post-meeting statement said.
Existing home sales rose 20.7% in May to an annual rate of 4.72 million in June, according to the National Association of Realtors (NAR).
While a monthly rise, this represents an 11.3% annual decline from 5.32 million in June 2019.
More buyers are making concessions to win bidding wars amid a deepening housing shortage, record-low interest rates.
In June, 19.9% of successful offers submitted by Redfin agents in select major U.S. markets waived the inspection contingency, compared with just 13.2% during the same month in 2019. Winning offers waived the appraisal contingency at a similar rate—20.6%—up from 17.4% in June of the prior year and representing the largest share since at least 2018, when Redfin began tracking this data.
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