Housing Affordability Inches Down, Despite Record-Low Mortgage Rates

Despite hovering around their all-time low for several months now, it looks like mortgage rates have done about all they can for housing affordability.

According to a new report, skyrocketing home prices have now outstripped their power, and overall homebuying affordability is now moving downward.

Data from mortgage insurer First American shows that record-low mortgage rates boosted American homebuying power for much of 2020. At one point, buyers could afford a whopping $15,000 more house thanks to declining interest rates.

But now, with home prices up 8% over last year and 1.5% between just July and August, those days have officially come to an end.

Despite hovering around their all-time low for several months now, it looks like mortgage rates have done about all they can for housing affordability.

According to a new report, skyrocketing home prices have now outstripped their power, and overall homebuying affordability is now moving downward.

Data from mortgage insurer First American shows that record-low mortgage rates boosted American homebuying power for much of 2020. At one point, buyers could afford a whopping $15,000 more house thanks to declining interest rates.

But now, with home prices up 8% over last year and 1.5% between just July and August, those days have officially come to an end.

“Mortgage rates began declining in January 2020 and even dropped below 3% for the first time ever in August.,” says Mark Fleming, chief economist at First American. “But, as mortgage rates have fallen and the housing market has recovered amid strong demand and historically low supply, nominal house price appreciation has rapidly accelerated. In August, the dynamics powering affordability may have reached a tipping point.”

According to the report, affordability dropped by about $775 in August, despite mortgage rates hitting a new monthly low of 2.92%

Though the dip is small, Fleming says it indicates that rising home prices have begun to “erode the affordability gains of recent years.”

Buyers located in the Census Bureau’s Mountain region have it the worst. There, prices have risen by 9.2% in the last year. That area includes Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, and Wyoming.

At the metro level, home prices have risen the most in San Diego, Seattle, Cleveland, San Francisco, Los Angeles, Washington D.C., Boston, Phoenix, Miami and Tampa, Fla. In San Diego, prices rose nearly 30% between August 2019 and August 2020.

Only three markets have seen price growth decelerate: New York, Chicago, and Portland.

~ Aly Yale, Forbes

What Buyers Focus On Most When Touring A Home, According To Eye-Tracking Software

Turns out, it isn’t all about the stainless steel appliances.

One of the many mantras in the real estate world is the saying “kitchens sell houses,” but until now there has been very little information about exactly what it was in a kitchen that would make buyers pay attention. With the help of a few homebuyers wearing glasses that track eye movements, we are beginning to have some hard facts.

It isn’t the shiny metallic fridge or the latest high-tech dishwasher their eyes go to when they first walk in the kitchen. It’s the oven. Many of the buyers in the study would go so far as to look inside the oven, and some of them would even turn it on to see how well it worked. So if you’re selling your home, make sure the oven is so clean it sparkles inside and out. If it isn’t in working order or has a few bad burners, you don’t necessarily have to get it replaced, but you might consider offering the buyer a credit for a new one.

Bedrooms are one of the next priorities in a house that can make or break a sale and eye-tracking software reveals a buyer’s eyes go straight to the bed when they walk into the room. Most likely buyers are wondering if their bed will fit in the space and if there is enough room to fit the rest of their furniture as well. This means if you’re in triage mode when it comes to decluttering on short notice, make the bedrooms a priority over other rooms in the house.

Outdoor accessibility was another big takeaway from the study. When buyers walked into a room that accessed the backyard their eyes immediately went to the outdoor space and the doors that opened out to it. Make sure the windows and doors (if they have glass) are as clean as can be so they show off the view to the outdoors in the best way possible.

But how about those stainless steel appliances? Are they worth it in the end? This study wasn’t designed to measure whether people’s eyes looked at stainless steel more than other types of finishes, but I’ll pass on the main reason why they have become so much of a trend: They can make a small kitchen look much bigger. The reflective surface acts the same way a mirror does by bouncing light around the room and giving the impression of spaciousness. To continue with the mirror example, a designer once told me hanging a mirror is almost as good as adding a window to a room. Stainless steel can have the same impact within a kitchen so it is still worth keeping it in mind if you are going to buy a new appliances.

~ Amy Dobson, Forbes

Home Sales Continue To Rise Despite Low Inventory

Existing home sales continued their surge in September, marking the fourth consecutive month of a strong upward trajectory, according to the National Association of Realtors.

Each of the four major regions witnessed month-over-month and year-over-year growth, with the Northeast seeing the highest climb in both categories.

Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 9.4% from August to a seasonally-adjusted annual rate of 6.54 million in September. Overall sales rose year-over-year, up 20.9% from a year ago (5.41 million in September 2019).

In a low-interest rate environment, many buyers who are juggling remote work and learning are searching for larger homes with extra rooms and a dedicated place for an office.

“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” said Lawrence Yun, NAR’s chief economist. “I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”


The median existing home price for all housing types in September was $311,800, up 14.8% from September 2019 ($271,500), as prices rose in every region. September’s national price increase marks 103 straight months of year-over-year gains.

Total housing inventory at the end of September totaled 1.47 million units, down 1.3% from August and down 19.2% from one year ago (1.82 million). Unsold inventory sits at a 2.7-month supply at the current sales pace, down from three months in August and down from the four-month figure recorded in September 2019.

The week of Oct. 17 marked the fourth week in a row of homes selling nearly two weeks faster than the prior year.

“During a time when the housing market usually slows down, we are once again reminded that 2020 is anything but typical,” said realtor.com chief economist Danielle Hale. “Going into the last half of October, the median U.S. home for sale is still priced near the year’s peak and is selling almost two weeks faster than last year. At the same time, the pace of change has steadied and for some indicators, even slowed. This could be a welcome relief for buyers who have navigated not only a pandemic, but also a fiercely competitive 2020 homebuying season characterized by double-digit price growth and record low inventory.”

Bidding wars have erupted in many markets where would-be buyers fought over a dwindling supply of homes.

Ruben Gonzalez, chief economist for Keller Williams real estate franchise, predicts mortgage rates will continue to drive demand and are going to remain near record lows the rest of the year, and likely well into 2021.

“Accelerating price increases are potentially going to start to reverse some of the benefits we are seeing from low mortgage rates, and this could start to slow demand from entry-level buyers as their purchasing power diminishes,” he said.

The average commitment rate for a 30-year conventional, fixed-rate mortgage decreased to 2.89% in September, down from 2.94% in August, according to Freddie Mac.

Sales in vacation destination counties have seen a strong acceleration since July, with a 34% year-over-year gain in September.

“The uncertainty about when the pandemic will end coupled with the ability to work from home appears to have boosted sales in summer resort regions, including Lake Tahoe, mid-Atlantic beaches (Rehoboth Beach, Myrtle Beach), and the Jersey shore areas,” said Yun.

Properties typically remained on the market for 21 days in September – an all-time low – seasonally down from 22 days in August and down from 32 days in September 2019. Seventy-one percent of homes sold in September 2020 were on the market for less than a month.

“Higher earners have been more likely to retain their incomes, allowing the housing market to continue booming despite extremely high unemployment levels,” said Gonzalez. “As long as unemployment remains elevated, there is a possibility that we see layoffs spill into the higher-paying sectors that are currently propping up the housing market.”

First-time buyers were responsible for 31% of sales in September, down from the 33% in both August 2020 and September 2019.

Individual investors or second-home buyers, who account for many cash sales, purchased 12% of homes in September, a small decline from the 14% figure recorded in both August 2020 and September 2019. All-cash sales accounted for 18% of transactions in September, unchanged from August but up from 17% in September 2019.

“It’s a tale of two economies,” said Tendayi Kapfidze, chief economist for LendingTree, an online lending marketplace. “Higher income groups are doing far better than lower income groups. Home sales were at a 14-year high, but the details are informative. Homes under $100,000 were down 16.3%, from $100,000 to $250,000 up 4.3% but homes over $1 million were up 106.5%. This change in the mix of homes is a driver of the jump in prices.”

~ Brenda Richardson, Forbes

Puget Sound region sees ‘extraordinary’ drop in housing inventory

Puget Sound region sees ‘extraordinary’ drop in housing inventory
Posted on October 20, 2020

Amid the ongoing pandemic, the Puget Sound housing market has become a peculiar one to say the least, thanks in large part to plummeting inventory.

Housing prices across King, Snohomish, and Pierce County have skyrocketed over the last month, with double-digit year-over-year increases in median home prices in all three areas. This comes amid an historically low inventory for prospective home buyers Windermere Chief Economist Matthew Gardner says.

“We have to go back to good old Economics 101,” Gardner said. “When you have net new demand and you limit supply, what happens to prices? They rise, and that’s very much the case.”

According to the Northwest Multiple Listing Service (NWMLS), all three major counties had under a month’s worth of inventory in September, a year-over-year decrease of 43%. Looking at historical data dating back to 1999, Gardner couldn’t find a single month with inventory supply that low.

“It is quite extraordinary,” he noted. “Yet at the same time, buyers are clearly out in force.”

Despite the economic recession brought on by the COVID crisis, demand has been buoyed by “remarkably, historically low mortgage rates,” and a surge in high-income buyers.

“In most areas, we are virtually sold out in the more affordable, mid-price and upper end segments of the market,” John L. Scott Real Estate CEO J. Lennox Scott told the NWMLS in a recent news release. “We’re also seeing a record-setting number of luxury properties going under contract across King, Pierce, and Kitsap counties.”

Elsewhere, the downstream effects of the recession have largely been felt by lower income renters, rather than homeowners.

“Middle and upper middle classes are doing just fine,” Gardner described. “The wealthy are doing really well, and lower income households are absolutely not. They are hurting more than anyone else.”

~Nick Bowman, KIRO

August pending home sales soar to a record high, fueled by rock-bottom mortgage rates


Pending home sales rose 8.8% in August compared with July, reaching a record high pace, according to the National Association of Realtors survey, which dates to January 2001.

Sales were 24.2% higher than August 2019.

These sales track signed contracts on existing homes, not closings, so they are an indicator of closed sales in the next one to two months.

“Tremendously low mortgage rates – below 3% – have again helped pending home sales climb in August,” said Lawrence Yun, NAR’s chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should, in the absence of inflationary pressure, keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.”

Yun also noted that not all pending sales contracts turn into closed sales, due to both sampling measures and mortgage and appraisal issues; therefore we may not see record closed sales in the coming months.

Mortgage rates started the month falling to a new low. They jumped sharply mid-month, but only briefly. Low mortgage rates have given buyers more purchasing power and added fuel to fast-rising home prices.

Homebuyers have been pouring into the market, thanks to a coronavirus pandemic-induced stay-at-home culture. They want more space, both indoors and outside for both work and school from home.

Home price gains have been accelerating for the past three months, with some large local markets seeing double-digit annual increases. Nationally, the median price of a home sold in August (by closed sale) was 11% higher compared with August 2019, according to the NAR.

“Home prices are heating up fast,” said Yun. “The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment.”

Prices are mostly being fueled by an incredibly low supply of homes for sale. The inventory of homes for sale at the end of August was down 18.6% annually, putting the market at a 3.0-month supply.

“The increase in contract signings is shrinking the limited number of homes for sale to some of the lowest levels in recent history,” said George Ratiu, senior economist at realtor.com. “This is causing a massive imbalance to the market’s supply and demand, which is rewarding sellers with home price increases that more than double the pace of wages. Looking forward, with no signs of these dynamics shifting anytime soon, more price increases are likely on the way and affordability will likely continue to be a challenge for many buyers.”

Homebuilders are ramping up production, but not nearly fast enough. Sales of newly built homes in August, which are also measured by signed contracts, came in a remarkable 43% higher than August 2019, according to the U.S. Census. The homebuilders are benefiting from the lack of existing homes for sale, and their soaring sales are evidence that existing home sales would be higher if there were more on the market.

Regionally, pending home sales rose 4.3% month to month in the Northeast and were 26.0% higher annually. In the Midwest, sales rose 8.6% for the month and were up 25.0% from August 2019.

Pending home sales in the South increased 8.6% monthly and 23.6% annually. In the West sales rose 13.1% monthly and 23.6% annually.

~Diana Olnick, CNBC

Mortgage demand from homebuyers surges 40% from a year ago amid sales spree

The end of August usually marks the beginning of the slow season for housing, but as with everything else, this year’s trends are like no other.

Mortgage applications to purchase a home rose 3% last week from the previous week and were a stunning 40% higher from a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The year-on-year comparison is usually in single digits. While it may have been skewed slightly by the Labor Day holiday,which fell earlier last year, purchase demand is still running significantly higher than a year ago.

Buyers are still getting significant incentive from low mortgage rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances up to $510,400 fell to 3.07% from  3.08%, with points remaining unchanged at 0.36, including the origination fee, for loans with a 20% down payment.

For the 15-year fixed, the rate declined to a record low of 2.62% on conventional loans.

“There continues to be resiliency in the purchase market,” said Joel Kan, an MBA economist. “The average loan size continued to increase, hitting a survey high at $368,600. Highlighting the strong overall demand for buying a home, conventional, VA and FHA purchase applications all increased last week.”

Applications to refinance a home loan rose 3% for the week and were 60% higher than a year ago. Refinance volume has been extremely high since rates plummeted last March, but the pool of borrowers who haven’t already taken advantage of these low rates is shrinking.

The refinance share of mortgage activity increased to 63.1% of total applications from 62.5% the previous week. The adjustable-rate mortgage share of activity decreased to 2.2% of total applications.

~ Diana Olick, CNBC

Seattle-area home prices rise faster than nearly every other US city, driven in part by younger homebuyers

For the fifth month in a row, home prices around Seattle rose faster in June – 6.5%, year-over-year – than any of the nation’s other top 18 metro areas, save Phoenix, according to new data from S&P CoreLogic Case-Shiller Home Price Index. That’s more or less the same rate of growth we’ve seen since spring.

Price growth in King, Pierce and Snohomish counties topped national averages for the eighth month straight. National year-over-year home price growth of 4.3% in June pointed to a “stable” market, said S&P Managing Director Craig Lazzara in a statement. Prices rose in each of the 19 large cities that Case-Shiller tracks; among just those metros, year-over-year price growth averaged 3.5%. (Typically, Case-Shiller examines home prices in 20 metro areas, but data for the Detroit metro area has been unavailable since the start of the pandemic.)

A major imbalance between the number of homes for sale and a swell of interested buyers on the market has boosted prices. Until very recently, far fewer people were listing their homes than did in 2019. Many would-be sellers decided instead to take advantage of historically low mortgage rates to refinance their homes.

Price growth in the Seattle metro area has been driven by an uptick in cost for the area’s most affordable homes. Prices rose nearly 9% year-over-year among homes that sold for less than $448,069, which represent the most affordable third of all homes sold this spring. Among the most expensive third of homes, those selling for more than $670,317 – including most homes in King County, where a typical home now runs $727,500 – prices rose relatively more slowly, 5% compared to last year.

The lure of an under-3-percent mortgage has drawn younger buyers to the market, many likely for the first time. Across generations, only millennials are taking out more for-purchase loans than last year, according to data on VA loans from the Department of Veteran Affairs. The number of Seattle millennials who received for-purchase loans in the first nine months of the fiscal year rose 21.8% over the same period the previous year.

Refinances, however, have swollen a whopping 276% across all demographics, compared to the previous period.

Katherine Khashimova Long, The Seattle Times 

Seattle housing market sees ‘massive changes’ in post-lockdown landscape

With many people continuing to hunker down in their homes during the ongoing pandemic, home-buying habits have gone through a sizable shift, both in Seattle and across the United States.

Puget Sound housing market ‘remarkably stable’ despite pandemic

“Nationwide, the pandemic caused massive changes in buyer behavior,” a recent study from real estate researchers at Point2 noted. “From square footage and number of bedrooms to access to outdoor amenities like pools and gardens, the post-lockdown home seekers are not willing to compromise on anything – and they are willing to pay the (higher) price to get it.”

In Seattle, that’s manifested in a marked increase in searches for homes under 1,000 square feet, as prospective buyers have scrambled to get out of apartments and into permanent homes.

Prior to the pandemic, roughly half of searches tracked by Point2 were for
homes under 1,000 square feet. In the months since, that number has jumped all the way to 83%. In terms of the specific types of homes people have searched for, there’s been an especial focus on homes with designs that emphasize more isolated living spaces, rather than open floor plans.

“Before the lockdown, many homebuyers preferred open-plan rooms and interior design elements that made for seamless transitions between separate living spaces,” said Point2’s study. “However, just a few short weeks of parents, children and couples stuck together has reestablished the importance of and need for privacy and personal space.”

Why Puget Sound millennials are finally looking to buy homes

While searches for smaller homes have become more frequent in Seattle in recent months, the price range of prospective home buyers has also increased. Whereas just 15% of searches prior to the pandemic were for homes between $500,000 and $750,000, 29% of searches sat in that range after lockdowns began.

Across King County, home prices continue to rise, with the region seeing a 7.2% year-over-year increase in median prices from July 2019 to July 2020. Prices have climbed even higher in both Snohomish and Pierce County, where year-over-year prices were up 13.8% and 13.5%, respectively.

Nick Bowman. MyNorthwest

Real Estate In The Pandemic Era: The Winds Of Change Are In The Air

To say that this is the strangest year most of us have ever experienced is an understatement. Let’s talk about the changes that are happening in the real estate industry as a result of the pandemic.

First, the good news. The combination of historically low interest rates and people leaving big cities in droves has fueled the single-family housing market around the United States. These low rates are helping people who previously could not afford to buy a home to do so now. To get that ultra-low rate, lucky buyers who still have a job will be required, in some cases, to put at least 20% down and must have a credit score over 700 with proof of their ability to pay. Those unable to meet these requirements will largely remain in the rental pool.

But does a robust homebuying flurry hurt the residential rental market? Not really, except for rentals in large cities from which people are fleeing. Amid lockdown, people learned that they can actually work from home or anywhere that has an internet connection. Productivity levels overall have increased, and parents can be home with the kids. An office space is the newest must-have for a family home.

Even after the pandemic, will workers want to go back to the office? Likely not. Months of sheltering in place have soured many on big-city living. The effect we can predict is that rents in large cities, which have historically been extremely high, will go down as inventory increases. For those who are staying in the big cities, co-living, which had become popular, may see waning interest. Co-living offers the cheaper alternative of a commune-like experience as opposed to renting an apartment and shorter-term or month-to-month leases. As rents drop and traditional apartments become more accessible, these new alternatives may lose popularity.

The commercial office space rental industry has also changed. Because of the work-at-home requirement, companies (which are often locked into long-term leases on large amounts of office space) are finding that their employees do not want to come back to the office setting. Those who do want to work in an office may be accommodated in smaller venues with meeting rooms for the occasional gathering of larger groups and space for smaller meetings as needed. Companies are needing to renegotiate leases and downsize on space while their employees continue to work from home is changing the face of the commercial office space market.

Once a viable, sought-after asset, building owners are scrambling to do conversions of office space to live-and-work or residential-only space. In addition, the days of call centers may be numbered now that we know people can actually be at home for both sales and customer service jobs. If these changes prove to be reliable and growth-oriented, the days of large rooms full of sales and customer service staff may be gone. The potential is that the cost of brick-and-mortar space for companies will decrease, thus adding a potential profit to the bottom line.

But this is not good news for the investors in those buildings, who will have to quickly adapt or die with a paucity of commercial tenants wanting office space. Smaller businesses — like accounting offices, legal groups and medical dental space, gyms and spas — will not be changed much in terms of their ongoing need for commercial office space.

Many small shops and retail outlets are suffering greatly from the lockdown. Rolling restarts and subsequent shutdowns are moving restaurants closer to insolvency. The fear is that when the PPP funds run out, it will be curtains for many of them. I have been through small towns around Idaho and see empty storefront after empty storefront. Sadly, these businesses are not coming back. Many small-town businesses were already operating month to month with little in reserve for slowdowns and simply could not weather the storm. It is not just the business owners who have lost; it is also the owners of those rental properties that are now sitting vacant. Those investors still must make mortgage, insurance and tax payments, and there is no money coming in from rents to support those cost outlays. They, too, will suffer if they cannot re-rent the spaces and make the mortgage and tax payments as required.

For the restaurants, bars, small retail businesses and large office-space holders, the near-term future is bleak — that is the bad news. Banks have not forgiven payments but in some cases have delayed them. That means that for many borrowers, large payments will be due before long. Because reopening is still not a sure thing, many will not be able to catch those payments up. Foreclosures loom unless there is a way found to give short-term support to investors with mass vacancies.

For those investors who have free cash available to invest, there will be some good buying opportunities and grateful owners who are only too willing to sell. This pandemic too shall pass, and for those who played and lost, there is hope that they can come back another day for the big win.

Timmi Ryerson, Forbes

Mortgage Interest Rates Decrease Yet Again, Nearly Reaching Lowest Rate On Record

Two weeks ago mortgage interest rates slipped below 3% for the first time on record and after briefly inching their way back across that threshold last week interest rates have returned to just under 3% once again. According to data released from Freddie Mac, interest rates on a 30-year loan are 2.99%, not quite the 2.98% they reached two weeks ago but slightly better than the 3.01% they settled on during the week in between.

For a 15-year loan the rates landed at 2.51%, down from 2.54% last week and 2.58% the week before that. This steady decrease, without the slight uptick we saw with 30-year loans last week, is another indication of how willing lenders are to give loans to buyers with a strong financial profile on their application.

“It’s Groundhog Day in the mortgage market as rates continue to remain near historic lows, driving purchase demand over 20 percent above a year ago,” said Sam Khater, Freddie Mac’s Chief Economist, referring to the June data released from the National Association of REALTORS this week. “Real estate is one of the bright spots in the economy, with strong demand and modest slowdown in home prices heading into the late summer. Home sales should remain strong the next few months into the early fall.”

Not only did June see record sales, but home showings increased by 14.5% compared to May, according to data from ShowingTime which manages bookings for most of the home showings in the U.S. Showings are considered a leading indicator for how home sales will perform, typically 60 to 90 days in the future.

While demand is expected to stay strong, the applications for a mortgage did take a slight dip over the past week. According to data from the Mortgage Bankers Association, purchase applications decreased by 1.4% compared to the week before. However, this is still 21% higher than it was one year before so demand is very comfortably on the increase.

Refinance applications saw a tiny decrease, of .4%, which is still 121% higher compared to the same week a year ago. The biggest shift took place with FHA refinance applications, which decreased by almost 18%. This is because rates for FHA loans increased, by about 14 basis points, to 3.37%, according to MBA data. FHA loans typically make up about 10% of all loans, and that held true last week when they were 9.6% of applications (down from 10.8% the week before).

Amy Dobson, Forbes