Biggest hike in home prices in 2 years

Rates become a little more volatile in anticipation of election day next week with the 30- and 15-year mortgages moving in different directions. While the 30-year fixed rate mortgage dropped by 2 basis points to 3.00%, the 15-year fixed rate mortgage increased by 8 basis points to 2.56%.

current outlook:

In contrast to Treasuries over the past four weeks, the MBS market has been performing at high levels (which is good for interest rates). As the markets continue to ride out the volatility of October, housing prices continue to soar, homeownership levels stagnate, and rental conditions worsen.

biggest hike in home prices in 2 years

Less (Supply) is More (in Housing Price)

The S&P CoreLogic Case-Shiller National Home Price Index showed a monthly gain of 1.0% and an annual gain of 5.7% in August. This is the highest annual increase we’ve seen in two years. Of the 19 cities surveyed, the homes which experienced the largest growth were in Phoenix (9.9%), Seattle (8.5%), and San Diego (7.6%). This is in comparison to the lowest performing cities, which all have noticeably higher population densities: Chicago (1.3%), New York (2.8%), and San Francisco (4.1%). However, all 19 cities are still reporting both monthly and annual increases.

Note: Not all data is equal. CoreLogic’s index compares the sales prices of similar homes over the course of three months. In comparison, Realtor.com based their numbers on the median price of all sold homes. Since most of the homes sold at this time skew slightly higher in price, this inflated their estimated price increase to 15%.

The Homeownership Club Welcomes Slightly Fewer Members

After hitting record levels in Q2 of 2020, the homeownership rate fell a negligible 0.9% in Q3 of 2020, remaining at 67%. However, it did grow 2.6% from Q3 of 2019. This is yet another indication that white collar Americans have not been as affected by the pandemic’s wave of permanent job loss and eviction orders. Homeownership grew across all age groups and across all four regions, with younger buyers (35 and under) and the more affordable Midwest and South showing the largest increases.  

The only caveat is that this data from the Census Bureau may have been affected by inconsistent collection methods. During lockdown, far fewer in-person surveys were conducted. In July, only 39% of interviews took place in person. In comparison, 50% of the interviews were conducted in person in August, and 100% were conducted in person in September.

Rental Market Goes from Bad to Worse

While only 0.9% of homeowner housing was sitting vacant in Q3 of 2020, a much more significant 6.4% of rental housing was vacant. While this is actually a 0.4% decrease in the vacancy rate from last year, it was a 0.7% increase from last quarter. (Again, this data may have been affected by inconsistent collection methods).

In October, a survey of apartment market conditions revealed a Market Tightness Index of 35, making this the fourth consecutive quarter of deteriorating conditions. Any score below 50 means a contraction from last quarter. However, industry professionals are bolstered by the variation in responses (less than half respondents reported loosening conditions) as well as by the more favorable conditions of the suburban market.

“The forgone spring home-buying season appears to have fully shifted into summer months, leading to sales volumes that are picking up speed at a time when they would normally show signs of slowing. Additional demand was amplified by buyers looking for larger homes and second homes in resort and beach areas.”

SELMA HEPP, CoreLogic Deputy Chief Economist
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