Purchase activity reaches the highest level in over 11 years, homebuilder sentiment posts biggest monthly surge EVER, and gain for single family permits points to building growth. All data indicates a surge in market activity This Week in Real Estate. Click here to read more.
Historically low interest rates top real estate news This Week in Real Estate! For the third time in 2020 the mortgage market has recorded a new historical low for interest rates, according to the Mortgage Bankers Association. Plus, home prices are still appreciating despite the effects of COVID-19 according to CoreLogic’s newly developed Pending Price Index. Click here to read more.
We’re getting a better idea of how the worldwide coronavirus pandemic is impacting home sales as ATTOM Data Solutions releases its First Quarter Home Sales Report. Plus, a growing number of states are relaxing their social distancing protocols, but is it enough to cause the real estate market to thaw? And, homeownership rates are up despite the COVID-19 pandemic. We take a closer look This Week in Real Estate.
* U.S. Home Sellers Realized Average Price Gain of $67,100 in First Quarter of 2020. ATTOM Data Solutions released its First Quarter 2020 U.S. Home Sales Report Thursday, which shows that home sellers nationwide realized a home price gain of $67,100 on the typical sale, up from $66,264 in the fourth quarter of 2019 and up from $59,000 in the first quarter of last year. That $67,100 typical home-seller profit represented a 33.7 percent return on investment compared to the original purchase price, down from the post-recession high of 34.4 percent in the fourth quarter of 2019 but up from 32.8 percent a year ago. “The national housing market continued at full throttle in the first quarter of 2020, setting new price and profit records as it entered its ninth straight year of gains. After it looked like things were settling down last year, the market has again roared ahead, with significant increases,” said Todd Teta, chief product officer at ATTOM Data Solutions. “It is extremely important to note that the latest momentum is likely to hit a wall and reverse because of the drastic economic slowdown caused by the Coronavirus pandemic. Millions of Americans are newly unemployed, and most people are practicing social distancing, which could bring things to a halt just as the Spring buying season begins. Despite that cloud, the numbers for Q1 still do remain upbeat.”
* Home Purchase Applications Rise as Coronavirus Slowdown Begins to Thaw. With a growing number of states indicating over the last week that they are moving toward relaxing the social distancing protocols put in place to prevent the further spread of COVID-19, it appears that the real estate market may be beginning to thaw. In recent weeks, home purchase applications have declined sharply as people simply weren’t applying for mortgages. But that trend may be reversing, as new data from the Mortgage Bankers Association shows that home purchase mortgage applications recently rose to the highest level in nearly a month. “The news in this week’s release is that purchase applications, still recovering from a five-year low, increased 12% last week to the strongest level in almost a month,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
* Homeownership Rate Up in the First Quarter 2020. According to the Census Bureau’s Housing Vacancy Survey (HVS), the U.S. homeownership rate reaches 65.3% in the first quarter 2020. This is 1.1 percentage points higher than the rate of 64.2% in the first quarter of 2019, but not statistically different from the previous quarter reading of 65.1%. Strong owner household formation with around 2.7 million homeowners added in the first quarter has driven up the homeownership rate, especially under the decreasing mortgage interest rates and strong new home sales and existing home sales in the first two months before the COVID-19 pandemic hit the economy. The HVS provides a timely measure of household formations – the key driver of housing demand. The housing stock-based HVS revealed that the number of households increased to 124.4 million in the first quarter of 2020, 2.0 million higher than a year ago.
As a marketing agent, I want to sell homes for more, not merely sell more homes. That’s why I focus on strategic pricing, negotiating, marketing and networking. My last listing went pending in less than a week, during the COVID-19 pandemic. If you’re interested in selling, let’s talk!
We’re learning more about the potential economic impacts of the coronavirus as described by leading financial institutions. Past pandemics resulted in a V-shaped recovery, which is a sharp decline followed by a steep rebound, with minimal impact on housing prices. Despite global uncertainty what we do know is mortgage rates the past two weeks experienced the largest two-week decline since December 2008, people are still buying and selling real estate, the government has passed the largest financial stimulus package ever, and jobless claims have hit record highs. Let’s take a look at a few newsworthy events influencing This Week in Real Estate.
* Looking To The Future: What The Experts Are Saying. As our lives, our businesses, and the world we live in change day-by-day, we’re all left wondering how long this will last. How long will we feel the effects of the coronavirus? How deep will the impact go? The human toll may forever change families, but the economic impact will rebound with a cycle of downturn followed by economic expansion like we’ve seen play out in the U.S. economy many times over. When looking at GDP (the measure of our country’s economic health), a survey of three leading financial institutions shows a projected sharp decline followed by a steep reboundin the second half of this year. A recent study from John Burns Consulting also notes that past pandemics have also created V-Shaped Economic Recoveries like the ones noted above, and they had minimal impact on housing prices. This certainly gives hope and optimism for what is to come as the crisis passes. From expert financial institutions to business leaders across the country, we can clearly see that the anticipation of a quick return to normal once the current crisis subsides is not too far away. In essence, this won’t last forever, and we will get back to growth-mode.
* Residential Construction is Bright Spot in Jobs Report, but More Workers Start to Stay Home. While overall construction employment fell in March, according to the Bureau of Labor Statistics, residential construction added 2,000 jobs. It remains to be seen how long that will last. In its second weekly survey of residential homebuilders, conducted from March 24 to March 31, the National Association of Home Builders found 64% of respondents cited problems with the willingness of workers and subs to report to a construction site up from 42% a week earlier. “Keeping construction going is essential to our economy in so many ways. Shelter is as critical as food and water. So we need to continue building so that there’s not a shortage of housing downstream, particularly affordable housing,” said Toby Bozzuto, CEO of Bozzuto Group.
* Mortgage Rates Drop on Fed Intervention. The average U.S. rate for a 30-year fixed mortgage fell to 3.33% this week, according to Freddie Mac, as the Federal Reserve’s bond-buying program created demand for securities backed by home loans. Together with the prior week’s drop, it was the largest two-week decline since December 2008. The Fed revived its bond-buying program on March 15 in an attempt to grease the wheels of the lending markets and prevent the type of credit crunch that devastated the mortgage industry more than a decade ago. This week’s 17 basis point drop in the average 30-year fixed rate indicates it’s working. “That drop reflects improvements in market liquidity and sentiment,” said Sam Khater, Freddie Mac’s chief economist. “Homebuyer demand has declined in response to current economic conditions,” Khater said. “The good news is that the pending economic stimulus is on the way and will provide support for both consumers and businesses.”
The Federal Housing Finance Agency (FHFA) is suspending foreclosures and evictions for homeowners with a Fannie Mae or Freddie Mac-backed single family mortgage for at least 60 days due to the COVID-19 national emergency.
Fannie Mae, Freddie Mac (the Enterprises) and the Federal Home Loan Banks are taking steps to help people who have been impacted by the coronavirus. Fannie and Freddie are providing payment forbearance for borrowers impacted by the crisis, which will allow a mortgage payment to be suspended for up to 12 months by qualified borrowers.
If your ability to pay your mortgage is impacted, and your loan is owned by Fannie Mae or Freddie Mac, you may be eligible to delay making your monthly mortgage payments for a temporary period, during which:
You won’t incur late fees.
You won’t have delinquencies reported to the credit bureaus.
Foreclosure and other legal proceedings will be suspended
This decision follows the U.S. Housing and Urban Development’s announcement earlier this month to halt foreclosures and evictions for FHA loans on single-family homes for 60 days due to COVID-19.
If you have any concerns about your mortgage contact your mortgage servicer (where you send your monthly mortgage payments).
You can visit the HUD and FHFA websites for more information.
Economists are all over the board when it comes to predicting what’s next for our economy or how large of an impact the coronavirus will have on the housing market; however, new data on the condition of the market prior to the pandemic is giving us hope the market will bounce back when the pandemic passes. As we continue to navigate these uncertain times, here is what we do know… U.S. existing home sales climbed to a 13-year high in February, mortgage application volume remains high despite the rate of volatility, and residential construction remains strong as it awaits the coronavirus impact. Below are a few highlights from the third week of March impacting This Week in Real Estate.
“While the impacts of the coronavirus that causes COVID-19 continues to impact the housing market, once the effects of the pandemic pass, more homebuyers are likely to return to the market,” says Lawrence Yun, Chief Economist at the National Association of Realtors.
* U.S. Existing-Home Sales Climbed to 13-Year High in February.
U.S. existing-home sales rose 6.5% in February, increasing to a 13-year high, according to the National Association of Realtors. Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums, and co-ops – rose to a seasonally adjusted annualized rate of 5.77 million. This means sales were 7.2% above February 2019’s rate.
According to Lawrence Yun, NAR’s chief economist, February’s sales of over 5 million homes was the strongest increase since February 2007.
“For the past couple of months, we have seen the number of buyers grow as more people enter the market,” Yun said. “Once the social-distancing and quarantine measures are relaxed, we should see this temporary pause evaporate, and will have potential buyers return with the same enthusiasm.” That being said, Yun noted that February’s home sales were encouraging but not reflective of the current turmoil in the stock market or the significant hit the economy is expected to take because of the coronavirus.
“These figures show that housing was on a positive trajectory, but the coronavirus has undoubtedly slowed buyer traffic and it is difficult to predict what short-term effects the pandemic will have on future sales,” Yun said.
Despite the market’s instability, of the four major regions, only the Northeast reported a decline in existing-home sales in February, while the remaining regions saw increases, including sizable sales gains in the West, according to NAR. Existing-home sales in the West jumped by 18.9% to an annual rate of 1.26 million in February, which is an 11.5% rise from 2019’s rate. The median price in the West was $410,100, increasing 8.1% from this time in 2019.
* Mortgage Application Volume Remains High Despite Rate Volatility.
After last week’s report on a record-busting week for mortgage applications what probably is surprising, as the country goes into virtual lock down over the coronavirus outbreak, is how strong activity remained.
“The ongoing situation around the coronavirus led to further stress in the financial markets late last week, with unprecedented volatility and widening spreads. This drove mortgage rates back up to their highest levels since mid-February and led to a 10 percent decrease in refinance applications. However, refinance activity remains very high,” says Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
The Federal Reserve’s rate cut and other monetary policy measures to help the economy should help to bring down mortgage rates in the coming weeks, spurring more refinancing. Amidst these challenging times, the savings that households can gain from refinancing will help bolster their own financial circumstances and support the broader economy. The purchase market was on firm footing to start the year and has so far held steady through the current uncertainty. Looking ahead, a gloomier outlook may cause some prospective homebuyers to delay their home search, even with these lower mortgage rates,” says Kan.
* Residential Construction Remains Strong as it Awaits Coronavirus Impact.
As anticipated, the two major data sets in February’s residential construction report declined from their January level but both construction permitting and housing starts maintained a significant edge over their performance in February 2019. February permits for residential construction were up 13.8 percent compared to a year earlier. Single-family permits were up 23.3 percent from a year earlier. Housing starts grew by 39.2 percent year-over-year. Single-family starts grew by 35.4 percent from a year earlier.
“Due to the slowdown in economic growth and the volatility in markets from the coronavirus, mortgage rates will remain lower for longer, which will help homebuyers in the longer run,” Kan continued, “However, we may start to see these homebuilding trends take a turn for the worse, depending on the industry’s ability to continue day-to-day operations during these difficult times.”
As fears surrounding the spread of the Coronavirus (COVID-19) impacts economies and industries worldwide, a recent survey by the National Association of Realtors (NAR) details how the Coronavirus (COVID-19), changes in mortgage rates and huge swings in the stock market are impacting the behavior of home buyers and sellers on the West Coast and nationwide.
Mortgage Rate Change
The vast majority of sellers in California and Washington have decided not to make changes to their home listing despite concerns regarding the spread of the Coronavirus (COVID-19). California is actually reporting a surge in sellers entering the market to take advantage of the historically low interest rates. Just 4% of sellers both in California and nationwide have decided to remove their home from the market and refinance. That number is slightly higher in Washington at 6%. (see graph below)
Big fluctuations in the stock market over Cornonavirus (COVID-19) concerns doesn’t appear to be having a major impact on buyers’ behavior. According to the NAR Flash Survey, realtors reported their buyers are more excited by the lower mortgage rates than they are nervous about the stock market fluctuations. (see graph below)
The majority of members reported there has been no change in buyer interest due to the coronavirus (COVID-19). However, 16 percent of members cited interest has decreased nationwide. In California, 21 percent of members cited a decrease in interest. In Washington, 19 percent of members cited a decrease in interest.
Despite coronavirus (COVID-19) concerns and big fluctuations in the stock market, the majority of sellers are still choosing to list their homes. Nationwide, only 10% of realtors cited a decrease in interest. On the West Coast, California realtors are reporting a 14% decrease while Washington realtors are reporting a 15% decrease in interest. (see graph below)
Even fewer sellers are removing their home from the market due to coronavirus (COVID-19) concerns. Most markets reported no change; however, in Washington 5% of realtors reported homes removed from the market, California reported 4%.
Sellers are, however, changing some of their requirements when it comes to how their home is viewed. About one quarter of home sellers nationwide are making changes including stopping open houses, requiring buyers hand washing or hand sanitizing, or asking buyers to remove shoes and wear footies. In California, 34 percent of sellers have adopted these or other changes. In Washington, 44 percent of sellers have adopted these or other changes. (see graph below)
Sample: The survey was delivered to 70,036 residential members including 7,000 members in the states of California and Washington. The survey had 2,518 useable responses, including 313 from California and 308 from Washington.
Dates: The survey was deployed on Monday, March 9th, and was closed on Tuesday March 10th. One reminder email was sent.
The margin of error for overall results is +/-1.95 percent. This response rate is high enough and the margin of error is low enough that the results can be considered quantitative and reflective of all members within this margin of error.
According to the Federal Reserve’s Flow of Funds report released This Week in Real Estate the value of U.S. owner-occupied homes increased to a record of $29.2 trillion in the third quarter of 2019. Home values rise as mortgage rates remain low. Fannie Mae believes the average fixed rate in 2020 will probably be 3.6% and if so, will be the lowest annual average ever recorded in Freddie Mac records going back to 1973. Below are a few highlights from the first full week of 2020…
* U.S. Home Values Rise to Record $29.2 Trillion, Fed Says. The value of all U.S. owner-occupied homes increased to a record $29.2 trillion in the third quarter, according to a Federal Reserve report known as the Flow of Funds. That was a gain of 4.2% from a year earlier, the slowest annualized increase since 2012. The collective value of U.S. homes is now 21% higher than the bubble peak reached in 2006. The Fed’s tally of home values for all U.S. residential real estate, whether occupied by homeowners or not, was $32.9 trillion, the report said.
* U.S. Mortgage Debt Hits a Record $15.8 Trillion. Outstanding U.S. mortgage debt rose to $15.8 trillion in the third quarter of 2019, according to the Federal Reserve. The biggest chunk of debt was held on homes, at $11.1 trillion, followed by commercial, with $3 trillion of loans, multifamily at $1.6 trillion and farms at $254.1 billion, according to the Fed data. Mortgage debt is rising as U.S. real estate values gain. Low mortgage rates boost real estate prices, and hence the volume of loans, because cheaper financing means buyers qualify for higher-balance mortgages and can bid more for properties they want. The average fixed rate probably will be 3.6% in 2020, which would be the lowest annual average ever recorded in Freddie Mac records going back to 1973.
* Homebuying Sentiment Up Sharply From 2018. Fannie Mae’s Home Purchase Sentiment Index (HPSI) finished out the year with little change from November to December, but with a strong increase over the December 2018 version. “The continued strength in the HPSI attests to the intention among consumers to purchase homes. This is consistent with the Fannie Mae forecast for 2020,” said Doug Duncan, Senior Vice President and Chief Economist. “The HPSI hit and remained near an all-time high in 2019, driven by the 16-percentage point year-over-year increase in the share of consumers believing it is a good time to buy. The HPSI’s strength supports our prediction of a healthy housing market in 2020, as well as consumers’ appetite and ability to absorb the expected increase in entry-level inventory.”