Home Prices Hit a Record High

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According to the Census Bureau This Week in Real Estate homeownership reached a 12-year high in the second quarter. Below are a few newsworthy events from the last week of July that influence our business: 

Pending Home Sales Surge For a Second Straight Month. U.S. pending home sales increased 17% in June, the second consecutive month of double-digit gains, as low mortgage rates spurred demand for homes. A seasonally adjusted index measuring signed contracts was 6.3% above the year-ago level after state lockdowns caused by the COVID-19 pandemic pushed transactions into summer months, said Lawrence Yun, chief economist of the National Association of Realtors. “It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” said Yun. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.” The Fed began buying Treasuries and mortgage-backed securities in March to grease the wheels of the credit markets. That sent interest rates tumbling toward an all-time low reached in mid-July, when the average U.S. fixed rate for a 30-year home loan fell to 2.98%, according to Freddie Mac. It was the first time it broke the 3% threshold in a data series that goes back to 1971. Pending home sales in the Northeast region of the U.S. rose 54% in June, the biggest gain in the report. In the Midwest, sales increased 12.2%, in the South the index was up 11.9%, and in the West the gain was 11.7%, the report said.

How The Pandemic Pushed Home Prices to a Record High Amid Historic Economic Downturn. Who would have thought that this summer, with the number of COVID-19 cases surging and new rounds of restrictions and shutdowns, would yield one of the most competitive housing markets in recent memory? Nonetheless, home prices have hit record highs as buyers are battling it out across the nation over a limited selection of reasonably priced abodes. In July, the median home price shot up 8.5% year over year, to hit a new all-time high of $349,000, according to the most recent realtor.com data. And those mind-boggling high prices, shooting up in the middle of a recession with the worst unemployment since the Great Depression and an economy undergoing a historic contraction, are a direct result of the pandemic. Buyers paid a median $27,000 more for a home in July than they did last year because the supply of available properties for sale plummeted at the same time that demand for them had skyrocketed.

U.S. Homeownership Rate Soars to an Almost 12-Year High. The U.S. homeownership rate soared to an almost 12-year high in the second quarter as low-interest rates allowed more Americans to qualify for mortgages. The homeownership rate jumped to 67.9%, the highest since 2008’s third quarter, from 65.3% in the prior quarter, the Census Bureau said on Tuesday. “Lower rates always do a magic trick of bringing more buyers into the housing market,” said Lawrence Yun, chief economist for the National Association of Realtors. Yun said he was expecting the homeownership rate to be higher because of the cheaper financing costs, but didn’t foresee a jump of 2.6 percentage points that would put the number back to a level last seen before the widespread foreclosures that followed the 2008 financial crisis.

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