Homeownership peaked in 12 years during COVID – or did it?
The coronavirus could not stop the housing market
Homeownership is at its highest level in 12 years.
At least that’s what a new report from the Census office said.
Some experts doubt the data. Since the pandemic has affected the investigation, the number of homeowners may not be as high as it seems.
But one thing seems clear: Buying homes didn’t go away during the coronavirus.
In fact, Americans are buying homes about as fast as they can be listed, even when the economy is at a standstill.
How is it possible? And what happens next? We asked the experts.
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New report shows US homeownership skyrocketing
The latest data from the US Census Bureau showed an almost unbelievable increase in homeownership during the coronavirus pandemic.
According to the report, the homeownership rate increased significantly in the second quarter of 2020, reaching almost 68%. This is the highest level observed since the third quarter of 2008, 12 years ago.
Surprisingly, in the first half of 2020, it only took a few months for the homeownership rate to increase by around 3 percentage points.
To put this in perspective, it took about eight years for the rate to increase by 4 percentage points to its highest level in 2005.
Close-up: Increase in homeownership from 1997 to 2005 (4%) and in 2020 (3%)
Image: United States Census Bureau
It is also worth noting a few other statistics from the Census Bureau report:
- The Q2 2020 report showed an increase in homeownership for all age groups (from 35 and under to 65 and over)
- Homeownership among African Americans, Hispanics, Asians, Native Americans, Hawaiians and Pacific Islanders has also increased
Overall, the data paints a very rosy picture for homeownership in the United States – despite the coronavirus toll plaguing the economy as a whole.
But some experts say the numbers sound too good to be true. Here’s why.
Can we trust the registration numbers of owners?
Many experts are skeptical of the Census Bureau data because the coronavirus affected the way the survey was conducted.
Critique of 2020 Census Bureau data on homeownership
Nadia Evangélou is Senior Economist and Director of Forecasting for the National Association of Realtors. She says it was one of the housing industry’s most anticipated reports, as it reflects the impact of COVID-19 on housing demand.
“However, there are serious questions about the accuracy of this survey. It is likely that the second quarter results will be skewed by the pandemic,” she warns.
“Specifically, face-to-face interviews were suspended for the second trimester and replaced with attempted telephone interviews when contact details were available.”
“The current report may show an upward trend in homeownership. But we need to be careful when using the absolute numbers for homeownership rates. – Nadia Evangelou, Senior Economist, NAR
Therefore, the response rate was lower in this ratio than the average response rates for the second quarter of 2019.
“The current report may show an upward trend in homeownership. But we have to be careful when we use absolute numbers for homeownership rates, ”Evangelou explains.
Tony Julianelle, CEO of Atlas Real Estate, agrees.
“This is fascinating data. But it seems the underlying numbers vary too much and I’m not sure they correlate with actual sales data across the country, ”says Julianelle.
Support for a record number of owners in 2020
Suzanne Hollander, professor of real estate at Florida International University, thinks these numbers could be legitimate.
“The real estate agents I deal with regularly as a broker, teacher and lawyer tell me that single family homes are flying off the charts,” says Hollander.
Dan Putney, Managing Director of Mortgage Solutions at Finastra, echoes these thoughts.
“We understand that there has been a shift from cities to rural America, allowing for a safer coronavirus environment for families,” Putney said.
“And while spring is usually the busiest buying time, it has been postponed. This led to the biggest June on record in terms of purchasing volumes. “
Based on loan request data from Finastra’s loan origination portal, “we saw a 34% increase in requests for June, year over year,” he adds.
Fewer foreclosures can lead to more homeowners
Hollander also notes that the homeownership figures can be a bit skewed due to an overlooked factor.
“Foreclosure moratoria have been in effect for several months. This has an impact on the number of current owners, ”she said.
When the foreclosure bans end, the number of homeowners may fall back, or at least level off instead of continuing to rise.
Why buying a home was popular during the coronavirus
The United States may or may not have had a record high homeownership this year.
But whatever the final numbers, one thing is clear: Home buying has been hot during the coronavirus.
Evangelou says there are two main reasons the homeownership rate has increased in recent times.
“The first and foremost reason is record mortgage rates,” she explains.
“Homeowners have the opportunity to secure the lowest mortgage rates in history right now. According to Freddie Mac, the rate was 2.88% on a 30-year fixed rate mortgage recently.
Second, consider that Americans are increasingly working remotely due to the pandemic.
“As a result, there is a significant change in their preferences when it comes to hospitality features. More and more buyers want larger residences with a home office and space for their children to engage in distance learning, ”adds Evangelou.
“Specifically, they’re looking to own a property with one yard or more – somewhere they can get some fresh air without having to worry about social distancing. “
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Affordability for first-time home buyers
Matthieu Dailly, Managing Director of Tiger Financial Ltd., points to other factors behind the reported spike in homeownership.
“People spend less money on entertainment, dining and other discretionary purchases,” he says.
“For those who are already saving money for homes, this behavior may have gotten them to their goal much faster than expected, leaving the market with an abundance of potential buyers.”
“We are seeing more and more millennials benefit from lower mortgage rates and buy their first homes to raise their families. – Nadia Evangelou, Senior Economist, NAR
Millennials can also be a big reason for the spike.
“Gains from homeownership continue to be concentrated among millennial households. They represent the largest cohort of home buyers,” says Evangelou.
“We are seeing more and more millennials benefit from lower mortgage rates and buy their first homes to raise their families. “
Will the upward trend continue?
Many predict that homeownership will continue its upward trend in the near term. This is especially true if mortgage rates remain low, as expected, and the lack of inventory is not killing the trend.
“I’m waiting for the [homeownership] continue to rise since mortgage rates will continue to move around their historic lows. More specifically, the 30-year mortgage rate should average 3.1% for 2020 and 2021 ”, explains Evangelou.
Julianelle also predicts that more people will buy and own homes in the coming months.
Homeownership could continue to increase as rates remain low. Or, an upcoming recession could stem the tide of home buyers.
“After COVID-19, there will be continued demand for homeownership as families grapple with the lingering impacts of work and home school scenarios,” Julianelle said.
Others are not so optimistic that the desire to buy and own will continue at this rate.
“I wouldn’t expect to see continued growth as we head into a potential recession in a rumored second wave of the pandemic,” Dailly said.
“I think people will start to save more money to protect themselves from whatever the next six months might have in store for them. And we are likely to see a shift in global thinking towards considerations of immediate effect. “
Tips for Home Buyers Right Now
Buying a home during the coronavirus is bound to be a unique experience for everyone.
At first glance, record mortgage rates make it easier than ever to buy a home with an affordable mortgage payment.
But qualifying for low rates – or financing at all – has become more difficult as COVID has created higher volatility and more risk in the economy.
So, is it a good time to buy a house? It highly depends on your income, credit, job stability, and the local real estate market you are looking for. The answer will be different for everyone.
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