Rates continue to move sideways, despite plenty of movement in the bond market, as they await the resolution of uncertainties such as the presidential election, recovery from COVID, and the highly anticipated stimulus bill. While the 30-year fixed rate mortgage held steady at 3.02%, the 15-year fixed rate mortgage moved 3 basis points higher to hit 2.48%.
As state governments prepare to meet the CDC’s deadline for a vaccine distribution plan this Friday, investors take a collective sigh as Congress members fail once more to come up with a bipartisan stimulus plan. On the housing front, the FHFA commits to maintaining flexible lending requirements, Gen Zers begin to penetrate the real estate market, and second homes represent 5.5% of the housing stock
The FHFA Lends a Hand
Amidst a strong September housing market, which managed to achieve a year-over-year increase in housing starts and permits as well as the NAHB’s highest recorded builder confidence, many are still struggling to keep up. After a monumental decrease the week prior, the national forbearance rate is holding steady at 5.6% of all loans. Meanwhile, borrowers continue to face delays from COVID-19 as well as from strained lender capacity.
In order to address these issues, the FHFA has extended lending flexibilities to November 30th, as well as introduced policies to help disadvantaged borrowers. These include:
- alternative ways to get an appraisal for purchase and rate-and-term refinances
- alternative methods to document income and verify employment expanded use of power of attorney and remote online notarizations
- exemption from the adverse-market fee for low-income borrowers and those with loan balances up to $125,000
- new policy of classifying borrowers who are in active forbearance but who have kept up-to-date with their payments as “current” if they seek new mortgages
- this is the case for 20% of those in forbearance with GSE loans
Old Enough to Drink, Old Enough to Buy a House
Not to be left out of the biggest mortgage “sale” we’ve seen yet, Gen Zers are starting to enter the housing market with the average buyer being just 21 and a half. Having little savings and oftentimes underdeveloped credit, many are sticking to more affordable markets where median housing prices are between $200,000 and $400,000. These include Salt Lake City, Oklahoma City, and Indianapolis. Meanwhile, the metros where they’ve made the least impact are, uncoincidentally, also the most expensive ones: San Francisco, Los Angeles, and Denver.
To finance these houses, this group has an average credit score of 672, put down an average of $33,000, and requested $244,365 in funds. Thus far, they represent less than 10% of potential home buyers in metropolitan areas. However, being known for their frugality and money sense, this could change in the near future, assuming COVID-19 doesn’t hamper their career prospects.
Second Home Market is NOT Second-Rate
As of 2018 (the most recent year for which data is available), 5.5% of the nation’s houses are second homes, meaning they qualify for mortgage interest deduction under the Census Bureau’s 2018 American Community Survey (ACS) and aren’t an investment property, business property, or under construction. While we typically associate second homes with vacation destinations, many of them are in fact located in normal counties. 49 states have at least one county where second homes represent at least 10% and sometimes up to 50% of the housing stock (with the exception of Connecticut and Washington D.C.).
However, most second homes are concentrated in certain states and correlate with population density; most are located in or near metropolitan cities and half are located in one of nine states: Florida, Texas, California, New York, Michigan, North Carolina, Wisconsin, Pennsylvania, and Arizona.