Homeownership Rate Rises Close to Housing Boom Levels – Industry Outlook

By August 3, 2020Industry Outlook

Fed to Keep Rates Near Zero – Based on the Federal Reserve’s vote recently, it will keep its benchmark interest rate near zero. This will keep the cost of loans down until the economy starts to recover from the COVID-19 pandemic. The Fed also announced, it would be extending its lending and credit initiatives until the end of the year to help make it easier for Americans to get a loan. The Fed’s key benchmark rate is not directly tied to mortgage rates, but it often indirectly influences them. The federal funds rate is what banks charge one another for short-term borrowing. That does not reflect the exact rate that consumers pay. Interest rates are currently low, but “the challenge is that lending standards have gotten much stricter,” Tendayi Kapfidze, chief economist at LendingTree, told CNBC. “Banks are tightening standards pretty aggressively because they are concerned that the damage to the economy is going to be long lasting.” Greg McBride, Bankrate’s chief financial analyst, says consumers with a credit score of 700 or above are likely to get the best rates. The Federal Reserve is closely monitoring the economic impact of the pandemic. “The coronavirus outbreak is causing tremendous human and economic hardship,” the Fed said in a statement. “The path of the economy will depend significantly on the course of the virus.” 

Source and link to the full article:  “Fed Keeps Rates Near Zero—It’s Good to Borrow at Low Interest Rates, Experts Say. Here’s What Else it Means for Your Wallet,” CNBC (July 29, 2020); “Fate of the Economy Depends on Virus Control, Fed Says,” HousingWire (July 29, 2020); and “With Coronavirus Surging, Fed Keeps Key Interest Rate Near Zero, Vows More Support,” USA Today (July 29, 2020)

Contract Signings Make a ‘Remarkable’ Move – According to the National Association of REALTORS®’ Pending Home Sales Index, pending home sales continued to escalate in June. This is the second consecutive month of increases, and all amid the COVID-19 pandemic. Contract signings are up 6.3% compared to a year ago, NAR’s index shows. “It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” says Lawrence Yun, NAR’s chief economist. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”


© National Association of REALTORS®

Source and link to the full article:  National Association of REALTORS®

Homeownership Rate Rises Close to Housing Boom Levels – Based on the Census Bureau report recently, 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. 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.

Source and link to the full article:  “U.S. Homeownership Rate Soars to an Almost 12-Year High,” Housingwire.com (July 28, 2020) and “The Homeownership Rate Jumped to the Highest Level Since 2008—But Looks Could Be Deceiving,” MarketWatch (July 29, 2020)

Seller Profits Hit New High Amid Struggling Economy – According to research firm ATTOM Data Solutions, while unemployment remains high and the economy continues to suffer from the COVID-19 pandemic, the housing market is proving resilient. During the second quarter of this year, home sellers netted a median $75,971 profit at resale, up from $66,500 in the first quarter and $65,250 a year earlier. The second-quarter figure represents a 36.3% return on investment, the highest level since the Great Recession. This is up from 34.5% in the first quarter and 33.7% a year prior, ATTOM Data Solutions reports. “The housing market across the United States pulled something of a high-wire act in the second quarter, surging forward despite the encroaching economic headwinds resulting from the coronavirus pandemic,” says Todd Teta, chief product officer at ATTOM Data Solutions. “Profit margins hit new records as prices kept climbing, with few indications that the impact of the virus would topple the market.”

Source and link to the full article:  ATTOM Data Solutions

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