The U.S. Census Bureau recently released its homeownership data for the second quarter of 2020. As of Q2, the homeownership rate is up to 67.9%. This is the fourth quarterly increase in a row and the highest homeownership rate since 2008 before the last housing crisis. The rate is up from 65.3% in Q1.
The way that Q3 seems to be going, it won’t be a surprise to see the homeownership rate jump yet again this quarter. The real estate market was all but shut down during April and May in most states because of coronavirus, but the activity has picked up with ferocity since then. Real estate is moving at a pace we’ve never quite seen before. Buyer demand is sky high and mortgage rates are at historic low. Meanwhile, the housing inventory can’t keep up with the demand and that’s causing homes to sell fast as their prices skyrocket.
“Mortgage rates are the icing on the cake for households that were thinking about buying,” says Ralph McLaughlin, chief economist for Haus. “They found an unexpected opportunity during the worst economic downturn America has seen since the Great Depression.”
More Young Buyers
One of the most interesting pieces of data is the fact that younger buyers under age 35 registered a Q2 homeownership rate of 40.6%, which is as high as it’s been in over 12 years. Renter households declined by 7.2% as more renters turned to homeowners.
Sign of Economic Recovery?
All signs point to this housing boom leading the charge toward a strong economic recovery—at least for some segments of the population. Remember that many of those most affected by COVID-19 job losses and furloughs were workers in the service sector with lower wages. Many of them are renters, while the home buyers in the corporate sectors weren’t as affected by these business shutdowns. Many just worked for home, which only fueled the desire to buy new property that better suited their more remote lifestyles. The coronavirus self-quarantine lifestyle changed the desired housing needs of many homeowners who aren’t content with their living spaces.
Other Factors to Consider
There are some areas of concern when looking at these numbers, however. There were roughly 4.3 million Americans taking advantage of mortgage forbearance options as of mid-June. The numbers have gone down since then as homeowners exit forbearance and start making up for missed payments. This has put a strain on mortgage lenders in recent months and greatly affected all borrowers’ abilities to qualify for new home loans. Qualification standards have gone way up—especially for non-conventional mortgage loans—as lenders and banks look to bring their risk levels way down.
The Census Bureau will also be the first to tell you that they had to collect data a little differently during the height of coronavirus lockdowns. Thus, the response rate was 12% lower than it was in Q1. Even so, the homeownership rates based on those who did respond seemed to rise across the board, regardless of race or age. Yet, there is still a major discrepancy between white citizens and people of color. 76% of white Americans are homeowners while only 47% of black Americans and 51.4% of Hispanic Americans own a home.
Overall, the data does suggest we are moving in the right direction economically as the real estate market often has a significant effect on the American economy as a whole. Still, we must always take any data with a grain of salt as it’s easy to manipulate and show things as better or worse than they might actually be.
Ready to Move? Be Prepared to Act Fast!
The one thing I can say for sure is that real estate is moving at a super-fast pace right now. If you are thinking of buying, it is vital to get pre-approved for a mortgage loan. It not only helps you know what you can afford, but it will give you more buying power when making purchase offers. Home sellers are not going to want to take any chances either, so knowing the buyer is pre-approved (not just pre-qualified) can make a major difference in this competitive market.
If you are planning to buy a home or refinance your current mortgage to today’s lower rates, call us at (858) 761-7795 or email me at firstname.lastname@example.org