Americans are feeling financially confident and it’s good news for the housing market, according to the latest Home Purchase Sentiment Index from Fannie Mae. The survey – which measures consumers’ perceptions of buying and selling a home, job security, mortgage rates, prices, etc. – hit a new high in July. Doug Duncan, Fannie Mae’s chief economist, says it’s due to favorable mortgage rates and increased job confidence. “Consumer job confidence and favorable mortgage rate expectations lifted the HPSI to a new survey high in July, despite ongoing housing supply and affordability challenges,” Duncan said. “Consumers appear to have shaken off a winter slump in sentiment amid strong income gains. Therefore, sentiment is positioned to take advantage of any supply that comes to market, particularly in the affordable category.” In other words, Americans are feeling good about their income and may be ready to buy. In fact, the survey found a 3 percent month-over-month increase in the number of respondents who said now was a good time to buy a house. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. The decline was significant and largely brought on by the beginning of a trade war with China. Mike Fratantoni, MBA’s senior vice president and chief economist, said lower rates will likely spur refinance activity. “The Federal Reserve cut rates as expected last week, but the bigger influence on the financial markets was the beginning of a trade war with China. The result was a sharp drop in mortgage rates which will likely draw many refinance borrowers into the market in the coming weeks,” Fratantoni said. Rates for 30-year fixed-rate loans fell to their lowest level since November 2016 and, as a result, refinance activity was up 12 percent from one week earlier. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.
You don’t have to be an economist to know that recessions aren’t good. And, because the memory of the Great Recession and housing crash is still fresh, it’s natural that prospective home buyers and sellers worry when they hear another one could be on the way. But, according to a recent survey of housing experts and economists, that worry may be overblown. Why? Well, when you look at the 1,039 times since 1997 that states have been in recession during a given month, home price appreciation remained positive 81 percent of the time – which is roughly the same as during periods of economic growth. In other words, though home prices plummeted during the Great Recession, that was atypical. The vast majority of the time, a recession has little effect on home prices. And, since today’s market suffers from too little inventory rather than too much, there is much less risk than there was during the last recession. In short, recessions aren’t good for the housing market but there’s little reason to worry that the next one will cause another home price collapse. More here.
Living close to a grocery store is a plus. It may not be your top priority when you’re out shopping for a house, but there’s no denying that the convenience of having a good store in the neighborhood is appealing. That’s why a recent analysis from ATTOM Data Solutions looked at zip codes that had at least one Whole Foods, Trader Joe’s, or ALDI location to see which was best for area home values. And though it didn’t definitively prove the stores had a direct impact on prices, it did have some interesting findings. For example, according to the results, homes near a Trader Joe’s brought the biggest return on investment when sold. In fact, the average home seller ROI was 51 percent, compared to Whole Foods which saw a 41 percent return and ALDI at 34 percent. On the other hand, when looking at home price appreciation over the past five years, zip codes with an ALDI were the clear winners, having the fastest growing values of the three. Homes in neighborhoods near an ALDI saw an average price appreciation of 42 percent, while home prices near a Whole Foods rose 31 percent and areas with a Trader Joe’s increased 33 percent. More here.
Buying a home is more than just finding a place to live. It’s an investment. Which means, as you pay down your mortgage and your home’s value appreciates over time, you build up equity. In simple terms, equity is the difference between what you owe on your home and its current market value. It’s also one of the primary arguments for homeownership and the reason it’s seen as being a vital part of achieving the American Dream. In short, it helps Americans build wealth. For example, a recent analysis of the housing market over the past 10 years found that the average equity per borrower increased from around $75,000 in the first quarter of 2010 to $171,000 in the first quarter of 2019. Of course, the housing crash and subsequent price recovery has a lot to do with just how much equity homeowners were able to accumulate over the past 10 years. But, though those results may not be typical, they arde a good illustration of how financially beneficial homeownership can be. By comparison, single-family rents increased 33 percent over the same time period. But rather than watching an investment grow, renters – unlike homeowners – gained nothing from that increase but a higher monthly payment. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were mostly flat last week from the week before. In fact, rates for 30-year fixed-rate loans with both conforming and jumbo balances were unchanged from the previous week. Loans backed by the Federal Housing Administration and 15-year fixed-rate loans both saw little week-over-week movement. But though mortgage rates continue to be favorable, demand for loans to buy homes decreased. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said a lack of available supply may be behind the decline. “Mortgage applications were lower last week, driven by a 3 percent decrease in purchase applications. While purchase activity was still up 6 percent from a year ago, the index has now decreased for three straight weeks and reached its lowest point since March,” Kan said. “Despite healthy demand, inadequate supply levels continue to hold back some would-be buyers.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.
For 17 consecutive months, pending home sales data showed contracts to buy homes were below year-before numbers. But after a 2.8 percent jump in June, they’ve finally broken the streak. In fact, according to the National Association of Realtors’ Pending Home Sales Index – which measures the number of contracts to buy homes signed each month – they’re now nearly 2 percent higher than last year. Lawrence Yun, NAR’s chief economist, said favorable buying conditions have spurred a positive turn for home sales. “Job growth is doing well, the stock market is near an all-time high, and home values are consistently increasing,” Yun said. “When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases.” In other words, conditions are good for buyers and, after seeing homeowner equity double over the past six years, Americans are enthusiastic about homeownership. The report showed pending home sales up in all four regions, with the West leading the pack with a 5.4 percent month-over-month increase. More here.
It is commonly assumed that homeownership isn’t as popular among younger Americans as it was among previous generations. But recent data seems to tell a different story. For example, according to the most recent homeownership numbers from the U.S. Census Bureau, Americans under the age of 35 have the fastest growing homeownership rate of any age bracket. In fact, the data shows that – while Americans over the age of 65 still have the highest rate of homeownership – younger Americans saw their rate increase from 35.4 percent to 36.4 percent during the second quarter of this year. By comparison, homeownership among adults 35-to-44 and those older than 65 both fell. That means, millennial home buyers may be the most active buyers in the market right now. This isn’t a big surprise, however. First-time home buyers historically have accounted for around 40 percent of home sales. And, since millennials are now at, or quickly approaching, the age of the typical first-time buyer, it makes sense that there’d be an increasing number shopping for and buying homes. More here.
It’s said that real estate is all about location. And that’s generally true. But it isn’t the only thing that influences which way prices are headed and how quickly. Price range also makes a difference. For example, a recent analysis of current home prices found that homes in affordable price ranges were seeing annual increases much larger than more expensive homes. In fact, the most affordable third of homes sold in June saw year-over-year increases of 8.7 percent, while the most expensive third of homes only saw prices grow 1.1 percent. That’s no small difference. It is, however, understandable. Supply and demand are more well balanced on the high end of the housing market. The market for affordable homes, on the other hand, currently has more buyers than available homes, which causes prices to rise. But there is reason for encouragement. Available inventory is improving and should begin to help moderate price increases. As this happens, the gap between the high and low end of the market will narrow. More here.
New homes only represent about 11 percent of all home sales. But, though they’re a small slice of housing market activity, they do play an important role. That’s because, when new homes are selling, builders build more houses. And, since adding new homes to the housing stock can help alleviate upward pressure on home prices, a healthy new home market can make buying conditions better for everyone. These days, though, the market faces some challenges. For example, the increasing cost of land and materials means builders struggle to build new homes in price ranges affordable for first-time and entry level buyers. For example, new numbers from the U.S. Census Bureau and the Department of Housing and Urban Development show that the median sales price of new homes sold in June was $310,400. The average price was $368,600. By comparison, at the end of 2018, the average price of homes purchased by first-time buyers was $219,300. Since a significant share of housing demand these days comes from younger buyers, new home sales are held back by the lack of affordable options for this demographic. More here.