Mortgage

Dwelling possession hit a 12-year excessive throughout COVID – or did it?

Coronavirus couldn't stop the real estate market

Home ownership is at its highest level in 12 years.

At least it says in a new report from the Census Bureau.

Some experts question the data. Since the pandemic hit the survey, home ownership numbers may not be as high as they look.

One thing seems clear, however: home buying hasn't gone away during the coronavirus.

In fact, Americans are buying homes as fast as they can get listed – even when the economy has stalled.

How is that possible? What happens next We asked the experts.

Review your eligibility to buy a home (August 11, 2020).

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New report shows home ownership exploding in the US

The latest data from the U.S. Census Bureau showed an almost incredible increase in home ownership during the coronavirus pandemic.

According to the report, the home ownership rate rose significantly in the second quarter of 2020, reaching nearly 68 percent. This is the highest value since the third quarter of 2008 – 12 years ago.

Amazingly, it took only a few months in the first half of 2020 for the home ownership rate to rise by around 3 percentage points.

To put this in perspective: It took around eight years for the rate to rise by 4 percentage points to its highest level in 2005.

Close-up: Home ownership increase between 1997-2005 (4%) and 2020 (3%)

Image: US Census Bureau

Also worth mentioning are some other statistics from the Census Bureau report:

The second quarter 2020 report showed an increase in home ownership for all age groups (35 and under 65 and over). Home ownership by African Americans, Hispanics, Asians, Native Americans, Hawaiians, and islanders in the Pacific also increased

All in all, the data painted a very rosy picture for home ownership in the US – despite the fact that the toll coronavirus has hit the economy as a whole.

But some experts say the numbers look too good to be true. Here's why.

Can I record home ownership numbers?

Many experts are skeptical of the data from the Census Bureau, as the coronavirus affected the way the survey was conducted.

Criticism of the home ownership data from the Census Bureau for 2020

Nadia Evangelou is a senior economist and forecasting director for the National Association of Realtors. She says this has been one of the most anticipated reports in the housing industry as it reflects the impact COVID-19 has on housing demand.

“However, there are some serious questions about the accuracy of this survey. It is likely that the pandemic will skew results in the second quarter, ”she warns.

"In particular, face-to-face interviews were suspended for the second quarter and replaced by telephone interview attempts when contact information was available."

“The current report could show an increased trend towards home ownership. However, we should be careful when using absolute home ownership rates. “–Nadia Evangelou, Senior Economist, NAR

As a result, the response rate in this report was lower than the average response rate for the second quarter of 2019.

“The current report could show an increased trend towards home ownership. However, we should be careful when using absolute home ownership rates, ”says Evangelou.

Tony Julianelle, CEO of Atlas Real Estate, agrees.

“That is fascinating data. However, the underlying numbers seem to have changed too much for me to be unsure whether they correlate with actual sales data across the country, ”explains Julianelle.

Support for record numbers of home ownership in 2020

Suzanne Hollander, a real estate professor at Florida International University, thinks these numbers are legitimate.

“The brokers, with whom I regularly work as a broker, professor and lawyer, tell me that single-family houses are flying off the charts,” says Hollander.

Dan Putney, Finastra's director of mortgage solutions, echoes these thoughts.

"We know there has been a move from cities to rural America that is creating a safer coronavirus environment for families," Putney said.

“And while spring is usually the busiest buying time, this has been postponed. This resulted in the biggest June ever in terms of purchase volume. "

Based on loan application data coming in through Finastra's lending portal, "we saw a 34 percent year-over-year increase in applications in June," he adds.

Fewer foreclosures can lead to higher home ownership numbers

Hollander also notes that home ownership numbers can be a bit skewed due to an overlooked factor.

“Foreclosure moratoriums have been in place for several months. This has an impact on the number of current homeowners, ”she says.

When the foreclosure bans end, there is a chance that home ownership numbers will fall again, or at least offset each other instead of rising further.

The US may or may not have seen record increases in home ownership this year.

Regardless of the final numbers, though, one thing is clear: home buying was hot during the coronavirus.

Evangelou says there are two main reasons the home ownership rate has risen lately.

"The main reason is the record-low mortgage rates," she says.

“Homeowners now have the option to secure the lowest mortgage rates in history. According to Freddie Mac, the interest rate on a 30-year fixed-rate mortgage was recently 2.88%. "

Second, you should keep in mind that Americans are increasingly working remotely due to the pandemic.

“As a result, there has been a significant shift in attitudes towards home functions. More and more buyers want bigger apartments with a home office and space for their children to receive distance education, ”added Evangelou.

"Specifically, they want to own a property with a yard or more acreage – a place where they can get some fresh air without worrying about social distancing."

Review your eligibility to buy a home (August 11, 2020).

Affordability for first time buyers

Matthew Dailly, General Manager of Tiger Financial Ltd., points out other factors contributing to the reported increase in home ownership.

"People spend less money on entertainment, dining, and other discretionary shopping," he says.

"For those who are already saving money on home, this behavior may have got them there much faster than expected and left the market with an abundance of potential buyers."

"We're seeing more millennials taking advantage of lower mortgage rates and buying their first homes to raise their families." –Nadia Evangelou, Senior Economist, NAR

Gen Y could be a big reason for the top too.

“Home ownership growth continues to be concentrated in millennial households. They represent the largest cohort of homebuyers, ”says Evangelou.

"We're seeing more millennials taking advantage of lower mortgage rates and buying their first homes to raise their families."

Will the upward trend continue?

Many predict that home ownership will continue its upward trend in the short term. This is especially true if mortgage rates remain low, as expected, and shortages of inventory don't kill the trend.

“I expect the (home ownership) rate to continue to rise as mortgage rates remain at their all-time lows. For 30 and 2021 in particular, an average mortgage rate of 30 years is expected to be 3.1 percent, ”says Evangelou.

Julianelle also sees more people buying and owning houses in the coming months.

Home ownership could continue to rise as interest rates remain low. Or an impending recession could stem the tide of home buyers.

“After COVID-19, there will continue to be a demand for home ownership as families cope with the ongoing impact of work and school scenarios from home,” Julianelle says.

Others are not so optimistic that the desire to buy and own will persist at this rate.

"I wouldn't expect further growth as we approach a possible recession in what is supposed to be a second wave of the pandemic," says Dailly.

“I think people will start saving more money to protect whatever the next six months have in store for them. And we will likely see a shift from big picture thinking to thinking about immediate effects. "

Advice to home buyers at the moment

Buying a home during the coronavirus is a unique experience for everyone.

On the surface, record-low mortgage rates make it easier than ever to buy a home with an affordable mortgage payment.

However, qualifying for low interest rates – or for funding at all – has become more difficult as COVID has created higher volatility and risk to the economy.

So, Is It A Good Time For You To Buy A Home? This depends heavily on your income, creditworthiness, job stability, and the local real estate market you are looking in. The answer will be different for everyone.

Check your new plan (August 11, 2020)

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