Real Estate Rundown July 2023

Photo by Brian Garrity via Unsplash

An Overview of Mortgage Rates

The current state of mortgage rates shows a mixed pattern. The 30-year fixed mortgage rate declined for the third consecutive week to 6.73 percent, and mortgage applications increased in mid-June. According to the Mortgage Bankers Association (MBA), mortgage applications increased by about 0.5 percent for the week ending on June 16, 2023, compared to the week prior. The refinance index in turn decreased by two percent from the previous week and was about 40 percent lower than the same week in 2022. There was a two percent increase in conventional purchase applications and a three percent increase in FHA purchase activity.

MBA’s vice president and deputy chief economist Joel Kan noted that first-time home buyers are responsible for a large amount of FHA purchase loans. While this is an indication that buyer interest is present, home purchasing activity continues to be limited by low levels of affordable homes.

Key Factors Affecting Housing Sentiments

Freddie Mac’s quarterly housing outlook survey sheds light on general housing sentiments and several key factors to keep an eye on. Market confidence remains unchanged and below the rolling two-year average. Homeowners continue to express concerns regarding housing affordability and financial obligations. A few key areas to keep an eye on are market confidence, housing affordability, payment concerns, and market activity. According to the survey, 43% of respondents are confident that the housing market will remain strong over the next year. This is unchanged compared to the previous quarter, but down eight percent compared to this quarter in 2022. The survey further revealed that housing affordability remains a cause for concern, as 61% of renters and 29% of homeowners report spending more than 30% of their monthly income on housing. Overall, 55% of people are concerned about making housing payments. In terms of market activity, 18% state their likelihood of purchasing a home in the next six months, while 16% of homeowners say they are likely to sell within the same timeframe. Lastly, 19% of homeowners indicate a potential inclination to refinance in the next six months.

A Surge in Below-Median Income Homeownership

An unexpected finding from the Censing Bureau’s Housing Vacancy Survey reveals a significant surge in below-median income family homeownership rates, rising from 48.0% to 53.4% since 2016. Interestingly, the homeownership rate for families with an income higher than the median has grown at a much slower pace compared to the below-median homeownership rate, which accounted for 70% of the cumulative growth in the overall homeownership rate in each subsequent quarter. Since the second quarter of 2016, below-median family income homeownership has increased by 5.4 percentage points while the above-median family income homeownership has only increased by 0.8 percentage points. Despite the challenges posed by an increasingly unaffordable housing market, below-median family income households are successfully overcoming constraints and achieving homeownership.

In summary, while mortgage rates fluctuate and housing affordability concerns persist, the below-median income homeownership rate shows a significant surge, highlighting the resilience of homeowners overcoming the constraints of the current housing market.

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