Home Prices Suddenly See Biggest Gains in 2 Years
Didier Malagies • September 2, 2020
Home Prices Suddenly See Biggest Gains in 2 Years
Jordan Borchard posted in
Housing in Housing News
Home Prices Suddenly See Biggest Gains in 2 Years
Source: CNBC
Written by: Diana Olick
Exceptionally strong demand, historically low supply and record low mortgage rates are combining to fuel the fastest home price growth since 2018.
Nationally, home prices in July were 5.5% higher than in 2019. That is a marked increase from the 4.3% annual gain seen in June, according to CoreLogic.
Falling mortgage rates helped bolster the pent-up demand from spring, when home sales ground to a halt due to the start of the coronavirus pandemic. The average rate on the popular 30-year fixed fell below 3% for the first time even in July, giving buyers additional purchasing power.
“Lower-priced homes are sought after and have had faster annual price growth than luxury homes,” said Frank Nothaft, CoreLogic’s chief economist. “First-time buyers and investors are actively seeking lower-priced homes, and that segment of the housing market is in particularly short supply.”
The inventory of homes priced under $100,000 was down 32% annually in July, according to the National Association of Realtors. Compare that with the supply of homes priced at $500,000 to $750,000, which was down just 9%.
Of course, all real estate is local, and especially so now as the pandemic is hitting some markets harder than others. Homebuying is gaining significant strength in more affordable suburban and rural areas as buyers seek more space for the new work-and-school-at-home economy. CoreLogic cites Nassau and Suffolk counties on Long Island, New York, where home prices jumped 4.3% annually in July, likely due in part to urban flight from New York City. Prices in the New York metropolitan area rose just 0.4%.
Home prices in San Francisco were also less than 1% higher annually, compared with the Washington, D.C., metropolitan area, which saw prices up over 5%. There is much less flight from the D.C. area than from San Francisco, as tech workers, who can now work from anywhere, leave the latter in search of more affordable homes.
Economists at CoreLogic predict that homes will stay positive in 2021, but that the gains will weaken, as the initial surge of pandemic buying wanes. Certain markets particularly hard hit by the pandemic could suffer the most. Las Vegas and Miami are notable examples because their economies rely heavily on tourism and entertainment.
There is also concern that as various mortgage bailout programs begin to expire, there will be a surge in sales of distressed homes. While the market will likely absorb these homes quickly, given the current housing shortage, the additional supply will take some of the heat out of home prices.
Start Your Loan
with DDA todayYour local Mortgage Broker
Mortgage Broker Largo See our Reviews
Looking for more details? Listen to our extended podcast!
Check out our other helpful videos to learn more about credit and residential mortgages.
This is a subtitle for your new post
Here are the main types of events that typically cause the 10-year yield to drop: Economic slowdown or recession signs Weak GDP, rising unemployment, or falling consumer spending make investors expect lower future interest rates. Example: A bad jobs report or slowing manufacturing data often pushes yields lower. Federal Reserve rate cuts (or expectations of cuts) If the Fed signals or actually cuts rates, long-term yields like the 10-year typically decline. Markets anticipate lower inflation and slower growth ahead. Financial market stress or geopolitical tension During crises (wars, banking issues, political instability), investors seek safety in Treasuries — pushing prices up and yields down. Lower inflation or deflation data When inflation slows more than expected, the “real” return on Treasuries looks more attractive, bringing yields down. Dovish Fed comments or data suggesting easing ahead Even before actual rate cuts, if the Fed hints it might ease policy, yields often fall in anticipation. tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
🏦 1. Fed Rate vs. Market Rates When the Federal Reserve cuts rates, it lowers the federal funds rate — the rate banks charge each other for overnight loans. That directly affects: Credit cards Auto loans Home equity lines of credit (HELOCs) These tend to move quickly with Fed changes. 🏠 2. Mortgage Rates Mortgage rates are not directly set by the Fed — they’re more closely tied to the 10-year Treasury yield, which moves based on investor expectations for: Future inflation Economic growth Fed policy in the future So, when the Fed signals a rate cut or actually cuts, Treasury yields often fall in anticipation, which can lead to lower mortgage rates — if investors believe inflation is under control and the economy is cooling. However: If markets think the Fed cut too early or inflation might return, yields can actually rise, keeping mortgage rates higher. So, mortgage rates don’t always fall right after a Fed cut. 📉 In short: Fed cuts → short-term rates (credit cards, HELOCs) usually fall fast. Mortgage rates → might fall if inflation expectations drop and bond yields decline — but not guaranteed. tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
