Today, we are going to discuss the revival of investor’s confidence in the housing market as the lockdown has eased and markets are reopening.
Dean Mon, the Chair of the National Association of home builders says, “We are seeing many positive economic indicators that point to recovery including low-interest rates, rising demand, and increase in mortgage applications.”
The mortgage rates have hit an all-time low in the last five years in the United States. The industry players predict the mortgage rates as:
- Fannie Mae: 3.6%
- Mortgage Baker’s Association: 3.7%
- Freddie Mac: 3.8%
- Redfin: 3.8%
These are expected to go further down by the end of the year. So, while the big investors have selected homes that went into foreclosure, the other buyers are now turning to builders. The build to rent companies have seen a rise in demand for new homes, which can be rent out. These homes are attractive to people who do not want to get into long term investments, considering the Coronavirus crisis and want to live in rented apartments.
The permits to build new homes have risen to 14.4% in May this year. Many financial advisors and realtors have come forward to encourage buyers to make an investment and lock in the mortgage rates as it is the best time to make a purchase. The mortgage applications to buy newly built homes have also risen by 10.9% in May, according to the Mortgage Bankers Association.
The home buyers index also jumped 21 points to 58 in June. This National Association of Home Builders (NAHB) Wells Fargo Index is based on three elements: a) Sales conditions, b) Sales expectations, and c) Buyers Traffic.
Current sales conditions jumped 21 points to 63. Sales expectations for the next six months rose 22 points to 63. Buyer’s traffic more than doubled from May to June, from 22 to 43. Hence, the economy is back with a positive housing market.
A new study at the Realtor.com indicates that Americans are eyeing homes in suburbs and rural areas as more attractive than urban locations. The views of online listings of suburban homes increased by 13% than May of 2019 compared to urban zip codes. This is a sign that the less densely populated areas are observing higher demand.
While the market has taken a positive turn for homeowners and buyers but who eventually benefits from the low rates depends on where the bulk of wealth lies. Is it with the younger married couples or older and more established individuals who will reap the benefits? Being able to manage a down payment has been the biggest hurdle for buyers, and that’s the reason why the homeownership rate is higher for those who have higher than median incomes.
The online housing data company Zillow just announced that it is planning to start the process of purchasing homes where it can identify a good opportunity to resell them.
Several unknowns still remain in the market, such as the effects of the country’s record-low unemployment rates and the unforeseen situation of Coronavirus pandemic. The purchasers are most likely to move to secondary markets away from urban areas towards more affordable markets.