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Today, home prices are appreciating. When we hear prices are going up, it’s normal to think a home will cost more as the trend continues. The way the housing market is positioned today, however, low mortgage rates are actually making homes more affordable, even as prices rise. Here’s why.
According to the Mortgage Monitor Report from Black Knight:
“While home prices have risen for 97 consecutive months, July’s record-low mortgage rates have made purchasing the average-priced home the most affordable it’s been since 2016.”
Black Knight continues to explain:
“As of mid-July, it required 19.8% of the median monthly income to make the mortgage payment on the average-priced home purchase, assuming a 20% down payment and a 30-year mortgage. That was more than 5% below the average of 25% from 1995-2003.
This means it currently requires a $1,071 monthly payment to purchase the average-priced home, which is down 6% from the same time last year, despite the average home increasing in value by more than $12,000 during that same time period.
In fact, buying power is now up 10% year-over-year, meaning the average home buyer can afford nearly $32,000 more home than they could at the same time last year, while keeping their monthly payment the same.”
This is great news for the many buyers who were unable to purchase last year, or earlier in the spring due to the slowdown from the pandemic. By waiting a little longer, they can now afford 10% more home than they could have a year ago while keeping their monthly mortgage payment unchanged.
With mortgage rates hitting all-time lows eight times this year, it’s now less expensive to borrow money, making homes significantly more affordable over the lifetime of your loan. Mark Fleming, Chief Economist at First American, shares what low mortgage rates mean for affordability:
“In July, house-buying power got a big boost as the 30-year, fixed mortgage rate made history by moving below three percent. That drop in the mortgage rate from 3.23 percent in May to 2.98 percent in July increased house-buying power by nearly $15,000.”
The map below shows the last time homes were this affordable by state:
In six states – Arkansas, Iowa, Kentucky, Louisiana, Maryland, and West Virginia – homes have not been this affordable in more than 25 years.
If you’re thinking of making a move, now is a great time to take advantage of the affordability that comes with such low mortgage rates. Whether you’re thinking of purchasing your first home or moving into a new one and securing a significantly lower mortgage rate than you may have on your current house, let’s connect today to determine your next steps in the process.
Today’s housing market is making a truly impressive turnaround, and it’s also setting up some outstanding opportunities for buyers and sellers. Whether you’re thinking of buying or selling a home this year, there are perks today that are rarely available, and definitely worth looking into. Here are the top two.
The most impressive buyer incentive today is the average mortgage interest rate. Just last week, mortgage rates hit an all-time low for the eighth time this year. The 30-year fixed-rate is now averaging 2.88%, the lowest rate in the survey’s history, which dates back to 1971 (See graph below):
This is a huge advantage for buyers. To put it in perspective, it means that today you can get a lower rate than any of the past two generations of homebuyers in your family if you decide to purchase at this time. Continue reading…
Last Friday, the Bureau of Labor Statistics (BLS) released its latest Employment Situation Summary. Going into the release, the expert consensus was for 1.58 million jobs to be added in July, and for the unemployment rate to fall to 10.5%.
When the official report came out, it revealed that 1.8 million jobs were added, and the unemployment rate fell to 10.2% (from 11.1% last month). Once again, this is excellent news as this was the third consecutive month the unemployment rate decreased.
There is, however, still a long way to go before the job market fully recovers. The Wall Street Journal (WSJ) put a potential date on that recovery:
“July’s payroll growth, at 1.8 million, still leaves total payrolls 12.9 million lower than in February. And yet if job gains continued at July’s pace, that deficit will be erased by March 2021. If payrolls reclaim their last peak in 13 months, that would be remarkably fast. It took more than six years after the last recession.”
During a pandemic, it’s important to differentiate those who have lost their jobs on a temporary basis from those who have lost them on a permanent basis. Morgan Stanley economists noted in the same WSJ article: Continue reading…
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With more companies figuring out how to efficiently and effectively enable their employees to work remotely (and for longer than most of us initially expected), homeowners throughout the country are re-evaluating their needs. Do I still need to live close to my company’s office building? Do I need a larger home with more office space? Would making a move to the suburbs make more sense for my family? All of these questions are on the table for many Americans as we ride the wave of the current health crisis and consider evolving homeownership needs.
According to George Ratiu, Senior Economist for realtor.com:
“The ability to work remotely is expanding home shoppers’ geographic options and driving their motivation to buy, even if it means a longer commute, at least in the short term…Although it’s too early to tell what long-term impact the COVID-era of remote work will have on housing, it’s clear that the pandemic is shaping how people live and work under the same roof.”
Working remotely is definitely changing how Americans spend their time at home, and also how they use their available square footage. Homeowners aren’t just looking for a room for a home office, either. The desire to have a home gym, an updated kitchen, and more space in general – indoor and outdoor – are all key factors motivating some buyers to change their home search parameters.
A recent realtor.com-HarrisX survey indicates:
“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% [of] 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. Continue reading…
America has faced its share of challenges in 2020. A once-in-a-lifetime pandemic, a financial crisis leaving millions still unemployed, and an upcoming presidential election that may prove to be one of the most contentious in our nation’s history all continue to test this country in unimaginable ways.
Even with all of that uncertainty, the residential real estate market continues to show great resilience. Here’s a look at what the experts have said about the housing market over the past few weeks.
Ivy Zelman, CEO of Zelman & Associates:
“Whether in terms of pending contract activity or our proprietary buyer demand ratings, the various measures of demand captured in this month’s survey can only be described as shockingly strong, in spite of the resurgence in COVID-19 cases.”
Logan Mohtashami, Lead Housing Analyst at HousingWire:
“Existing home sales are still down year over year by 11.3%, but as crazy as this might sound, we have a shot at getting positive year-over-year growth…We may see an existing home sales print of 5,510,000 in 2020.”
Matthew Speakman, Zillow Economist:
“In a remarkable show of resilience, the housing market has stared the pandemic right in the eye and hasn’t blinked.”
Todd Teta, Chief Product Officer for ATTOM Data Solutions:
“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.”
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As remote work continues on for many businesses and Americans weigh the risks of being in densely populated areas, will more people start to move out of bigger cities? Spending extra time at home and dreaming of more indoor and outdoor space is certainly sparking some interest among homebuyers. Early data shows an initial trend in this direction of moving from urban to suburban communities, but the question is: will the trend continue?
According to recent data from Zillow, there is a current surge in urban high-end listings in some larger metro areas. The month-over-month increase in these homes going on the market indicates more urban homeowners may be ready to make a move out of the city, particularly at the upper end of the market (See graph below):
With the ongoing health crisis, it’s no surprise that many people are starting to consider this shift. A July survey from HomeLight notes the top reasons people are actually moving today:
So far, it’s been quite a ride this year, and our nation has truly seen its fair share of hurdles. From COVID-19 to record unemployment and then the resulting recession, just to name a few, the second quarter of 2020 has had more than a few challenges. Amidst the many roadblocks, however, the U.S. homeownership rate rose again, signaling great strength in the recovery of the housing market and an indication that even in a time of crisis, Americans still feel confident about buying a home.
Yesterday, the U.S. Census Bureau announced:
“The homeownership rate of 67.9 percent was 3.8 percentage points higher than the rate in the second quarter 2019 (64.1 percent) and 2.6 percentage points higher than the rate in the first quarter 2020 (65.3 percent).”
The increase is also represented by race and ethnicity of the householder:
There are many reasons why the homeownership rate in this country is rising, and one of the key factors is historically-low mortgage rates. Rates hovering at all-time lows are helping to drive affordability and enabling more potential homeowners to enter the market today. According to Ralph McLaughlin, Chief Economist for Haus:
“Mortgage rates are the icing on the cake for households that were thinking about buying…They found an unexpected opportunity during the worst economic downturn America has seen since the Great Depression.” Continue reading…