Home ownership Rising in the U.S.
Spurred by low interest rates, Housingwire reports that the U.S. home ownership rate has soared to a 12-year high in the second quarter of 2020. The home ownership rate rose sharply to 67.9% (the highest since 2008s 3rd quarter). In the prior quarter of 2020, the rate was 65.3% according to the Census Bureau.
Additionally, the black home ownership rate rose to 47%, the highest since 2008. In the last quarter of 2020, the rate was 44%. This represents a major turnaround; last year the rate was the lowest ever recorded by the Census Bureau.
For Hispanics, the rates were equally impressive, increasing to 51.4%, the highest since 1994. In the prior quarter of 2020, the rate was 48.9%.
Lawrence Yun, chief economist for the National Association of Realtors, said cheaper financing costs have widened the pool of buyers who qualify for mortgages. Since lenders qualify borrowers by the amount of the monthly mortgage payment required compared to the applicant’s income, when financing costs decline, the monthly payment shrinks. According to Yun, “Lower rates always do a magic trick of bringing more buyers into the housing market.”
With the average 30-year fixed mortgage rate currently at about 3% according to Bankrate, a large number of buyers have entered the market. These prospective buyers are keenly aware that interest rates will not stay this low forever. Last year, at this time the mortgage rate was 3.75%.
Yun added, “Usually home ownership data moves at more of a glacier-slow pace, so to see such a sudden move like this was quite inspiring.
Interestingly, the greatest increase in home ownership was for the age cohort under 35, where it is now 40.6% compared with 37.3% the prior quarter. But the ownership rate increased for all age groups.
These increases are very important for the economy, but not only for the obvious reasons. The thirst to buy also serves to boost the homebuilding industry. And these builders will need to hire more workers who, in turn, will lead to greater consumer spending. But the domino effect doesn’t end there. The homebuilders will be ordering more steel, wood, appliances, etc. which will help these industries in the exact same way.
And according to Norada Real Estate Investments, the national median listing price is $350,000, up 10.1% year over year. Norada reports that buyers are moving much faster than last year to beat out competition and lock in low mortgage rates.
In Florida, single family existing home sales rose 11.7 % compared to July of 2019. This represents the best monthly performance since January. Existing townhouse sales in the Sunshine State rose at a similar clip. Pending townhouse sales rose a very healthy 19% compared with July of 2019.