The latest housing data offers a slightly disappointing consideration of mortgage applications, a more optimistic view of pending home sales, and a national homeownership rate that reached a height not seen in nearly 12 years.
The Mortgage Bankers Association (MBA) reported its Market Composite Index dipped by 0.8% on a seasonally adjusted basis for the week ending July 24 from one week earlier. percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index took a 1% decline from the previous week.
The seasonally adjusted Purchase Index was 2% lower than one week earlier while the unadjusted index was down by 1%—although it was also 21% higher than the same week one year ago. The unadjusted Refinance Index took a 0.4% downturn from the previous week, although it was also 121% higher than the same week one year ago, and the refinance share of mortgage activity increased to 65.1% of total applications from 64.8% one week earlier.
MBA also reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) remained unchanged at 3.20%, with points increasing to 0.37 from 0.35 (including origination fee) for 80% loan-to-value ratio loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) inched up to 3.52% from 3.51%, with points increasing to 0.30 from 0.29 (including origination fee) for 80% LTV loans. The effective rate increased from last week.
Among the federal programs, the FHA share of total applications dropped to 9.6% from 10.8% the week prior while the VA share of total applications increased to 11.2% from 10.8% and the USDA share of total applications remained unchanged at 0.6%
“Mortgage rates remained near record lows for conventional loans last week, and refinances in the conventional sector continued to slightly increase. However, rates on FHA loans rose, leading to an almost 18 percent drop in FHA refinances,” said Mike Fratantoni, MBA SVP and Chief Economist. “Homebuyers stepped back slightly, and there was a larger drop in purchase application volume for FHA, VA, and USDA loans. This trend, along with the fact that average loan sizes are increasing, indicate that prospective first-time buyers are being impacted more by the rising economic stress caused by the resurgence in COVID-19 cases, as well as the uncertainty on how the next round of government support will take shape.”
Separately, the National Association of Realtors (NAR) reported that its Pending Home Sales Index (PHSI) rose by 16.6% to 116.1 in June. On a year-over-year measurement, the index was up 6.3%. An index of 100 is equal to the level of contract activity in 2001.
On a regional basis, the Northeast PHSI grew 54.4% from May to June, reaching a reading of 95.4. The Midwest PHSI was up by 12.2% to 110.9 in the same period, while pending home sales in the South were up by 11.9% to an index of 140.3 and the PHSI for the West was 11.7% higher for a June reading of 99.6.
“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 Lawrence Yun, NAR’s Chief Economist. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”
Yun also noted that the “Northeast’s strong bounce back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country. These remarkable rebounds speak to exceptionally high buyer demand.”
While pending home sales were on the rise, so was the national homeownership rate. The U.S. Census Bureau reported a second quarter homeownership rate of homeownership rate of 67.9%, up from the first quarter level of 65.3% and higher than the 64.1% level of the second quarter in 2019. This was the highest homeownership rate since the 65.3% recorded in the third quarter of 2008—although the Census Bureau added a caveat to its data by noting the coronavirus pandemic required that the second quarter data collection took place entirely by telephone and not by in-person interviews.
During the second quarter, the homeownership rate was highest for those householders aged 65 years and over (80.4%) and lowest for those householders under 35 years of age (40.6%). While black households had a lower homeownership rate (47%) than white households (76%) and Asian households (61.4%), it was nonetheless the highest rate recorded in 12 years.
During the second quarter, the median asking sales price for vacant for sale units was $205,600, while the median asking monthly rent for vacant rental units was $1,033. The homeowner vacancy rate was 0.9% and the national vacancy rates for rental housing was 5.7%.