- Low interest rates motivating potential buyers to buy
- Remote workers looking for larger homes
- New mortgage purchase applications up +28% y/y, according to Mortgage Bankers Association
The most serious public health crisis in nearly a century that has already taken more than 185,000 American lives has NOT put the brakes on the nation’s housing market. Sure, when the COVID-19 outbreak overtook the country in March, the housing market plummeted but in June, the V-shaped recovery began and this recovery continues seemingly unabated.
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Lawrence Yun, chief economist with the National Association of REALTORS®, told HousingWire that two primary elements are driving this race to buy houses: low interest rates (under 3% in July and August) and remote workers wanting more space without regard to increased commute times.
Pending home sales rose +5.9% in July for the third consecutive month of gains. Yun said, “We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market. Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
Redfin research confirms Yun’s statements concerning both increased sales also indicates the strong demand for larger homes. Sales of large homes (3,000-5,000 square feet) nationwide increased a whopping +21.2% y/y in July while sales of medium-sized homes (1,500-3,000 square feet) increased +10% y/y and sales of small homes (300-1,500 square feet) increased +2.3% y/y. The average square footage of Redfin users saved searches was 1,864 in August, up from 1,794 one year ago at this same time.
Redfin research also verified that 21% of buyers wanted more space so they could work in a designated work area in their home. According to the latest data from the Mortgage Bankers Association, home buying demand is stronger in 2020 than during 2019. New purchase applications spike +28% y/y. Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said that the uptick cycle is now in its 15th consecutive week. “Lenders are reporting that the strong demand for home-buying is coming from delayed activity from the spring, as well as households seeking more space in less densely populated areas.”
The only constraint on this rush to buy is the inability of buyers to find a home for sale.
The MBA also reported that its refinance index is +40% higher now than it was last year at this time. Refinance applications grabbed a 62.9% share of total mortgage applications last week despite being down -3% from the week prior. Kan said, “Mortgage rates have remained below 3.5% for five months now, and it’s possible that refinance demand may be slowing and will not significantly increase again without another notable drop in rates.”
Thanks to HousingWire and InmanNews.