US Homeownership Rate Soars
Didier Malagies • July 29, 2020
U.A. Homeownership Rate Soars to an Almost 12-Year High
Jordan Borchard posted in
Housing in Housing News
U.S. Homeownership Rate Soars to an Almost 12-Year High
Written by: Kathleen Howley
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
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The homeownership rate jumped to 67.9%, the highest since 2008’s third quarter, from 65.3% in the prior quarter, the Census Bureau said on Tuesday. The reported noted a change in methodology that could have impacted the numbers: Because of the COVID-19 pandemic, in-person interviews were suspended and most of the survey was conducted by telephone, the release said.
The homeownership rate for Black Americans rose to 47%, the highest since 2008, from 44%, the report said. A year ago, the rate for Black families was the lowest ever recorded.
The rate for Hispanics increased to 51.4%, the highest in data going back to 1994, from 48.9%, the Census report said.
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.
Yun said he was expecting the homeownership rate to be higher because of the cheaper financing costs, but didn’t foresee a jump of 2.6 percentage points that would put the number back to a level last seen before the widespread foreclosures that followed the 2008 financial crisis.
“Usually homeownership data moves at more of a glacier-slow pace, so to see a sudden move like this was quite surprising,” Yun said. “Some of this increase could be due to the change in data measurement.”
The Census Bureau announced the change in data collection at the top of the report and linked to a five-page statement outlining the new methodology. The homeownership numbers are contained in the report known as the Current Population Survey/Housing Vacancy Survey, or CPS/HVS.
In the past, the bureau relied on workers who would go out and knock on doors to see what share of the housing stock was vacant, and they would interview people who came to the door to ask if they were homeowners.
“The coronavirus pandemic affected data collection operations for the CPS/HVS during the first and second quarters of 2020,” the Census Bureau said in the statement. “Data users should understand and consider these changes in data collection operations when interpreting the CPS/HVS estimates for the first and second quarters of 2020.
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✅ Why mortgage rates can rise even when the Fed cuts rates Mortgage rates don’t move directly with the Fed Funds Rate. Instead, they are primarily driven by the 10-year Treasury yield and investor expectations about inflation, recession risk, and future Fed policy. Here are the main reasons this disconnect happens: 1. Markets expected the rate cut already If investors already priced in the Fed’s cut weeks or months beforehand, then the cut itself is old news. When the announcement hits, mortgage rates may not fall—and often rise if the Fed hints at fewer future cuts. 2. Fed cuts can signal economic trouble Sometimes the Fed cuts because the economy is weakening. That can cause: Investors to worry about higher future inflation, or A “risk-off” move where money leaves bonds Both of these drive the 10-year yield UP, which pushes mortgage rates UP even though the Fed cut. 3. Bond investors wanted a bigger cut If markets expect a 0.50% cut but the Fed only delivers 0.25%, that’s seen as “too tight.” Result: 10-year yield jumps Mortgage rates move higher 4. Fed messaging (“forward guidance”) matters more than the cut Example: The Fed cuts today, but says: “We may need to slow or pause future cuts.” That single sentence can raise mortgage rates, even though short-term rates just went lower. 5. Inflation surprises after the cut If new inflation data comes in hot after a Fed cut, the bond market panics → yields go up → mortgage rates go up. Quick summary Fed Cuts Rates Mortgage Rates Move ✔ Expected or priced in Can rise or stay flat ✔ Fed hints at fewer future cuts Often rise ✔ Inflation remains sticky Rise ✔ Economy looks unstable Rise ❗ Only when 10-year yield falls Mortgage rates fall tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
New conforming loan limits increase to $832,750, which is great considering we have had price decreases on homes this year. So if you put down 3% the purchase price would be $858,051, and 5% down would be $876,578. Why would that matter? Well, you go above, and you are in Jumbo territory, where you have to put 20% down vs the 3% or 5% down. So, really great news that there is an increase, and when rates do come down, there will be all the homeowners who have the low interest rates, probably make a move to either downsize or upsize on their home, which will create activity and an increase in home prices. So overall, exciting to see the loan amounts increase to help offset the higher home prices tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
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