Average U.S. 30-year mortgage rate rises from all-time low


Average mortgage rates for a 30-year fixed mortgage increased slightly to 2.87% this week, the second-lowest on record, rising one basis point from last week’s all-time low of 2.86%, while the less-popular 15-year rate fell to a new low of 2.35%, Freddie Mac said on Thursday.

The 30-year rate has broken records nine times since March because of a Federal Reserve bond-buying program that has poured about $1 trillion into the mortgage markets. The central bank resurrected a program it first used during the financial crisis a dozen years ago to create competition for bonds and cause the yields that influence mortgage rates to shrink.

The Fed issued a statement on Wednesday after the end of a two-day meeting that said it would likely keep its benchmark overnight lending rate near zero through 2023, and would continue purchasing mortgage-backed securities “at least at its current pace” for as long as necessary.

Mortgage lending volume this year is likely to break records as homeowners refinance and new buyers scramble to take advantage of some of the cheapest financing costs history, Fannie Mae said in a forecast on Tuesday.

Originations this year are expected to reach an all-time high of $3.9 trillion, boosted by $2.4 trillion in refinancings, the highest level since 2003 and more than double the volume seen in 2019, the mortgage giant said.

“We continue to believe that a low-rate environment will support refinance demand over the forecast horizon,” Fannie Mae said in the forecast. “At the current interest rate of 2.86%, we estimate that nearly 69% of outstanding first-lien loan balances have at least a half-percentage point incentive to refinance.”

The annual average U.S. rate for a 30-year fixed mortgage will be 3.1% in 2020 and 2.7% in 2021, the forecast said, matching Fannie Mae’s prior monthly projection. Both would be the lowest annual averages on record.



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Spike in lumber prices boosts construction costs


The COVID-19 pandemic has caused lumber prices to skyrocket more than 160% since April after a spike in home renovation by cooped-up Americans, according to the National Association of Home Builders.

Higher prices are adding about $16,000 to the cost of a new house, said Robert Dietz, NAHB’s chief economist.

“As people started nesting in response to the pandemic, they started undertaking all sorts of home renovation projects,” Dietz said. “At the same time, sawmills started shutting down and have only partially reopened because of social distancing concerns.”

The lumber industry lost 6,000 jobs as a result of the pandemic, and has gained back – on a net basis – only half of those, he said.

“Growing demand for lumber met insufficient supply, and the result has been escalating prices,” Dietz said.

While the lumber industry has only partially reopened, imports from Canada, which supplies about a third of the lumber used in the U.S., are still being hit with 20% tariffs put in place by President Donald Trump three years ago.

“One thing that would help is if the Trump administration would temporarily suspend tariffs on lumber coming from Canada,” Dietz said.

The U.S. and Canada in 2006 signed a trade pact, the Lumber Softwood Agreement, that expired in 2015 without a replacement.

In 2017, Trump imposed tariffs on Canadian lumber imports as part of his “America First” economic policy aimed at reducing trade deficits. Subsequent tariff hikes were aimed at goods coming from China, South Korea, and other countries.

Trump, a self-proclaimed “tariff man,” has often said the countries manufacturing the goods pay the tariffs, and that American consumers aren’t getting hit with the bill. But, the tariffs are collected by U.S. Customs and Border Protection agents from importers when goods enter the country, who usually pass on the cost to consumers.

Another word for a tariff is a tax. Traditionally, Republicans have been opposed to tariffs, saying they interfere with free trade.

“The cost of getting lumber with that tax, combined, makes it very expensive,” Dietz said.



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Why is the housing market thriving in a pandemic?


The deadliest pandemic in more than a century has failed to derail the housing market because of the lowest mortgage rates ever recorded coupled with a shift in how people use their homes.

“The buyers are coming in because of the low interest rates – that’s the No. 1 reason,” said Lawrence Yun, chief economist of the National Association of Realtors said in an interview with HousingWire. “The secondary demand is coming from the work-at-home phenomenon that has people looking for bigger homes and caring less about commuting time.”

People now see their home not only as a place to live, but as a shelter during a national health crisis, Yun said. It’s also an office and, for families with children, often a part-time school.

Mortgage rates began tumbling in mid-March after the Federal Reserve announced it would buy mortgage bonds and Treasuries to keep credit flowing amid the pandemic. It was similar to a fixed-asset program it created during the financial crisis a dozen years ago.

The average U.S. rate for a 30-year fixed mortgage has been under 3% since late July, as measured weekly by Freddie Mac. When Fed Chairman Jerome Powell announced in March the Fed would purchase bonds, it was 3.65%.

Existing-home sales jumped 25% to a seasonally adjusted annual pace of 5.86 million in July, NAR said in an Aug. 21 report. It was the highest sales level since 2006 and the biggest monthly increase on record. The prior record for a monthly gain was the 21% jump seen in June, according to NAR data.

The supply of homes on the market was the lowest for any July since NAR started tracking the data about five decades ago, Yun said.

In the first months of the pandemic, Yun projected home sales in 2020 would see a 15% decline. After the Fed’s actions began driving down mortgage rates, he changed the estimate to a 7% decline.

Last week, Yun issued his latest monthly forecast that said existing home sales in 2020 likely will total 5.4 million, a gain of 1.1% from last year. Sales of new houses probably will rise 17% to 800,000, Yun said.

“We missed the spring buying season because of the pandemic, but the second half of the year looks quite dazzling,” Yun said.



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Housing cliff meets fiscal cliff with COVID-19 relief delayed


The so-called housing cliff, referring to the expiration of programs in the CARES Act keeping people in their homes, is about to meet the government-funding cliff, as the Sept. 30 end of the federal fiscal year sometimes is called.

White House Chief of Staff Mark Meadows said Wednesday he is not optimistic about reaching a new coronavirus relief deal before the end of September, predicting House Speaker Nancy Pelosi will use the government funding cliff at the end of next month as leverage to strike a deal on pandemic aid,” a Politico story said.

The House of Representatives passed the Heroes Act at the end of May to provide funding to states overwhelmed with pandemic costs, extend the eviction moratorium in the CARES Act, and continue providing jobless Americans with a $600 a week enhancement to unemployment benefits to keep them current on bills such as mortgage and rent.

The Senate ignored the House’s $3 trillion act, proposed a $1 trillion bill of its own that never made it to the floor to be debated because it lacked Republican support, and then went on its August summer vacation without passing anything.

“It’s really been Speaker Pelosi really driving this train as a conductor more so than really anybody,” Meadows told Politico. “And I think privately she says she wants a deal and publicly she says she wants a deal, but when it comes to dealing with Republicans and the administration, we haven’t seen a lot of action.”

President Donald Trump signed an executive order and three memorandums in a ballroom of the Trump National Golf Club in Bedminster, New Jersey, on Aug. 8 that he said would give Americans the help that Congress had failed to provide.

But, the executive order he signed, touted as an extension of the eviction moratorium in the CARES Act that expired in July, only directed various federal departments and agencies to “consider” and “review” ways to keep renters in homes using existing government programs.

Another directive the president signed would provide a $300 a week extra payment for people receiving unemployment benefits – originally, it was $400 with the requirement that states kick in $100, but that provision was later walked back. The money is coming from a Federal Emergency Management Agency fund intended for hurricane relief.

FEMA has approved about 35 states to offer the “lost wages assistance” that amount to half the $600 a week aid in the CARES Act that expired July 31. Fewer than half a dozen states have completed the rejiggering to their benefits systems required so they can send the checks from the FEMA fund.

Pelosi has said the way to reach a compromise between the House’s $3 trillion bill and the Senate’s $1 trillion proposal is to split the difference: Pass a $2 trillion bill. At a press conference on Thursday, she said the Senate’s proposal lacked enough funds for schools dealing with the pandemic, housing, and other needed aid.

“We have said to them, `We’re willing to meet you in the middle.’” Pelosi said. “We have a pandemic, and they’re coming in with an eyedropper.”



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Seattle’s eviction moratorium extended for the third time


Seattle Mayor Jenny Durkan extended the city’s eviction moratorium for the third time on Friday, giving residential and commercial renters a reprieve on payments through December.

Seattle’s first moratorium was passed in March, originally set to last through May 15. Then it was extended through June 4, then again through August 1.

In July, Washington Gov. Jay Inslee extended the state’s eviction moratorium through October 15.

Earlier this month, the Washington State Department of Commerce distributed about $100 million in state funding via the CARES Act, through its network of homeless services grantees and organizations serving homeless youth to operate a new rent assistance program.

This program is set to focus on preventing evictions and paying up to three months of past due, current and future rent to landlords who are eligible. This program ends on Dec. 31.

These funds will go to tenants who earn less than 50% of the area median income, have missed at least one rental payment since March and match other indicators of housing insecurity, the Seattle Times said.

“Funds addressing Washington’s homelessness crisis were limited before the pandemic, and the need is deepening as this pandemic continues to push more people toward the brink while we work to carefully reopen our economy,” said Commerce Director Lisa Brown in a statement. “We are targeting limited resources as quickly and equitably as possible, to those with the greatest needs.”

Nationwide, just 79.3% of apartment households made a full or partial rent payment by Aug. 6, according to the National Multifamily Housing Council’s Rent Payment Tracker.



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Pelosi calls out Trump’s repeal of Obama’s fair housing rule


House Speaker Nancy Pelosi issued a scathing critique of the Trump administration’s decision to overturn an Obama-era fair-housing rule, noting it comes at a time when the nation is having a reckoning on racial issues.

“The Trump Administration’s elimination of the fair housing rule is a betrayal of our nation’s founding values of equality and opportunity for all,” Pelosi said. “It is a shameful abdication of our government’s responsibility to end discriminatory housing practices and to lift up our nation’s most vulnerable communities.”

On Thursday morning, Housing and Urban Development Ben Carson announced that, at President Donald Trump’s direction, he was overturning a 2015 rule requiring cities and towns that receive federal funding to examine local housing patterns for racial bias and address any measurable bias.

The five-year-old rule governed the implementation of the Affirmatively Furthering Fair Housing, or AFFH, provision of the 1968 Fair Housing Act passed by Congress and signed into law by President Lyndon B. Johnson.

While HUD can’t overturn the AFFH provision of the Fair Housing Act by tweet, or by other means short of having a new law passed, it’s changing a HUD rule about how the law will be implemented.

“Today, we are tearing down the Obama Administration’s Affirmatively Furthering Fair Housing rule, which was an overreach of unelected Washington bureaucrats into local communities,” Carson said on Twitter.

HUD later said its rule will be replaced with a new rule called Preserving Community and Neighborhood Choice, which it says defines fair housing broadly to mean housing that, among other attributes, “is affordable, safe, decent, free of unlawful discrimination, and accessible under civil rights laws.”

The new rule gives people wider latitude, including the ability to self-certify.

“With the new rule, a grantee’s certification that it has affirmatively furthered fair housing would be deemed sufficient if it proposes to take any action above what is required by statute related to promoting any of the attributes of fair housing,” HUD said in a statement.

The efforts to change the AFFH rule began in January 2018 when HUD announced that it was delaying the deadline for local governments to submit their fair housing evaluations.

HUD efforts to change the AFFH rule were challenged in court by fair housing advocates, including the National Fair Housing Alliance, Texas Appleseed, and Texas Low Income Housing Information Service, which asked a judge to require HUD to enforce the AFFH rule as originally established.

But the judge overseeing the case eventually threw out the housing groups’ case, stating that they did not prove that they were harmed by HUD’s actions.

“Today, more than 50 years after the Fair Housing Act was enacted into law, we are still fighting to protect these critical civil rights and to eliminate once and for all our country’s legacies of redlining and racial segregation,” Pelosi said on Thursday.

In October 1973, five years after the Fair Housing Act was signed into law, the Department of Justice sued Trump and his father, Fred Trump, as well as their company, Trump Management, for violating Fair Housing provisions as they managed their apartments in the New York neighborhoods of Queens and Brooklyn.

Undercover federal investigators posing as rental applicants were told there were no vacancies if they were Black but were offered a choice of several apartments if they were white, the lawsuit said. Federal investigators also had evidence showing applications made by Black people were marked with codes such as “C” for “colored.”

The Trumps ultimately settled the suit without admission of guilt.



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Will Shutdowns, Lower Unemployment Benefits Hurt the Housing Market?


The U.S. housing market has defied the odds during a public health crisis, economic recession, and the highest unemployment since the Great Depression. Home prices are surging nationally as buyers duke it out over a very limited number of properties for sale. However, there are fears the already battered economy is on the verge of taking yet another hit.

COVID-19 cases are spiking in many parts of the country, which could lead to a second round of shutdowns, furloughs, and layoffs in some areas. The additional $600 that more than 17 million people are getting in weekly unemployment benefits is set to expire at the end of this month if Congress doesn’t act soon. And several large companies have announced tens of thousands of job cuts on the horizon.

Can residential real estate remain unscathed in the face of this looming financial pain?

Most experts expect the market will remain strong—at least in the short term. The blockbuster combination of record-low mortgage interest rates, which dipped below 3% for the first time ever this month, hordes of still-employed buyers descending on whatever listings they can find, and a brutal housing shortage have kept prices high.

“I don’t expect an immediate impact on the housing market,” says realtor.com® Senior Economist George Ratiu. “The housing market’s summer season will remain hot. It’s going gangbusters. In the late fall and winter, it could cool off as the market tends to be a lot slower and more small businesses close.”

Congress and the White House are attempting to bang out another coronavirus stimulus plan by the end of the month. This will likely provide another jolt to the economy. But it’s not yet decided what this stimulus would consist of, and how much of it would make its way to cash-strapped consumers.

This likely won’t be the last time the government is called on to step in. Another wave of foreclosures could deal the housing market a blow, knocking down prices and making families homeless. But that wouldn’t materialize until at least next year, after the maximum 12 months of mortgage forbearance runs out for homeowners with government-backed loans. The hope is by that time, laid-off homeowners will have returned to work and can make their payments or the federal government offers additional assistance.

“Will there be some fallout? Of course,” says Matthew Gardner, chief economist of Windermere Real Estate. “But I don’t think it will be enough to cause [housing] prices to drop.”

Additional unemployment benefits have helped keep the economy afloat

The additional $600 a week in unemployment benefits has helped sustain unemployed workers and their families—as well as the economy itself. If it isn’t renewed or the amount is cut significantly, “it can be catastrophic,” warns Edgar Ndjatou, executive director of Workplace Fairness, a national organization that educates the public on worker rights.

Normally when people lose their job, their spending drops by about 7%, according to a recent JPMorgan Chase & Co. study. But this time, those receiving the boosted unemployment benefits increased their spending by about 10%.

“In many parts of the country, it goes a long way,” says Ndjatou.

While the fate of the unemployment benefit isn’t likely to affect the housing market directly, the impact of its disappearance could trickle down to homeowners and potential buyers—and possibly even lead to more layoffs and corporate cost cutting, according to Gregory Daco, chief economist of Oxford Economics, a global economics consulting firm.

“There are a host of industries that depend on people and businesses spending money,” says Ratiu.

More than 51 million Americans have filed for unemployment since the beginning of the crisis in March, with about 17.3 million continuing to collect unemployment as of July 11. In plain English: Nearly 1 in 5 workers received unemployment in June—five times more than the previous record, according to to JPMorgan Chase.

Buying a home is such a monumental financial commitment, of course, that those who lost their jobs or a substantial chunk of their income are much less likely to be looking to buy a home.

For some, the extra $600 a week contributes to the most money they’ve ever brought home. More than two-thirds of Americans who lost their jobs, 68%, are receiving more in unemployment than they did at their previous jobs, according to a May University of Chicago study.

“The life support the economy was on is being removed,” says Taner Osman, manager of regional economics analysis at Beacon Economics, a Los Angeles–based economics consulting firm. “You’re obviously going to have somewhat of a crash.”

More layoffs on the way

The unemployment picture may currently be looking a bit brighter as states have reopened and some workers are back at their jobs—but the layoffs are far from over.

Many economists expect the double-digit unemployment rate, which hit a high of nearly 15% in April before falling to roughly 11% in June, to continue through the year and probably into the next. New rounds of layoffs could hurt workers in higher income brackets this time around. But those job losses could be offset by folks going back to their jobs in newly reopened industries such as shipping, warehousing, or manufacturing.

“Whether things get better or worse, it’s not going to be a big movement one way or another,” says New York University economics professor Lawrence White.



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Low inventory means higher prices for California’s housing market


The California housing market rebounded in June with the largest month-to-month sales increase in nearly 40 years, and California’s median home price hit its own record high, the California Association of Realtors said.

After the statewide median home price fell below $600,000 in May, it rose to $626,170 in June, which was up 2.5% from June 2019. This makes it the highest recorded May-to-June average, CAR said.

Existing single-family home sales totaled 339,910 in June on a seasonally adjusted annualized rate, up 42.4% from May and down 12.8% from June 2019.

Homes priced below $500,000 made up 48% of total sales in May 2020, but only made up 44% of all sales in June 2020. Sales of million-dollar properties, on the other hand, increased in market share to 18.1% in the most recent month compared with 15.6% in May 2020.

“A new record high in the statewide median price suggests that there is stronger housing demand from more qualified, affluent buyers in this extremely favorable lending environment,” CAR Senior Vice President and Chief Economist Leslie Appleton-Young said in a statement.

Meanwhile, year-to-date statewide home sales were down 12.9% in June.

“Home sales bounced back solidly in June after hitting a record bottom in May, as lockdown restrictions loosened and pent-up demand driven by record-low interest rates roared back,” said CAR President Jeanne Radsick in a statement. “While the momentum is expected to be sustained as we kick off the third quarter, the resurgence in coronavirus cases remains a concern and may hinder the market recovery in the second half of the year.”

Just about half of the counties tracked by CAR, 26 out of 51 to be exact, had a year-over-year loss in closed sales. Mono County had the highest decline by far, down 40%. Napa County trailed, going down 28.2%. 

As a response to the pent-up demand from the delay of home-buying season, median home prices in the Central Valley rose 7.4% from last year, CAR said. Home prices in Southern California also rose 3.3% from the year prior. 

Speaking of pent-up demand, housing supply continued to trend downward on a year-over-year basis as well, CAR said. Active listings fell more than 25% for the seventh month in a row and active listings sank 43%. 

Across the state, all areas had housing supply decline more than 30% from the year prior, CAR said. More specifically, Southern California had the biggest drop in supply, as for-sale listings fell 47.3% year over year.

CAR conducted a Google poll earlier this month that revealed 44% of consumers said it was a good time to sell, up from 40% a month ago, and slightly down from 49% a year ago.

Likewise, 31% of consumers said now is a good time to buy a home compared to the 23% who said the same thing last year.



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Average FICO scores rise across the board, according to Ellie Mae


Ellie Mae‘s Origination Insight Report for June detailed the decline in mortgage rates for the sixth consecutive month, and noted some interesting trends in closing rates and FICO scores.

According to the report, the average 30-year rate fell from 3.43% in May to to 3.4% percent in June.

“Interest rates decreased for the sixth consecutive month and we’re seeing a rebound in the purchase market which now represents 42% of all closed loans, a 7% increase from May,” said Jonathan Corr, President and CEO of Ellie Mae.

During the month, the rate for 30-year conventional loans fell to 3.42%, declining from 3.4% in May. The rate on VA loans fell to 3.2% from 3.24% and the 30-year rate on FHA loans came in at 3.41%, down from 3.45% the month prior.

Notably, closing rates for all loans decreased to 73.4% in June, down from 76% in May, and the average time to close increased to 47 days in June, up from 45 days in May.

Ellie Mae indicates closing rates on refinances decreased to 73.2% in June, down from 75.9% in May, and closing rates on purchase loans decreased from 76.4% in May to 74.2%  in June.

“Homebuyers are taking advantage of these historically low rates to both buy and refinance but it does appear that lenders are looking for borrowers with better credit across all mortgage products as FICO scores have continued to increase across the board since March,” Corr said.

According to Ellie Mae, the average FICO scores on all closed loans increased to 751 in June, up from 750 in May, while FICO scores increased month-over-month for both purchase and refinances across conventional, FHA and VA loans.



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Gentrification comes from lack of housing supply, Urban Institute says


A recent study from the Urban Institute reveals that higher housing costs as a result of the shortage of housing inventory is leading affluent buyers to seek out low- or moderate-income neighborhoods.

This creates gentrified neighborhoods.

Due to historical housing inventory shortages, gentrification is happening quicker.

According to the 2018 Home Mortgage Disclosure Act and 2018 American Community Survey data, nationally, 14% of low-income buyers are taking out new mortgages to buy homes in low- or moderate-income neighborhoods. This is happening at much lower rates than low-income homeownership rates in these neighborhoods, which is 31%. While the Urban Institute report was written shortly before the latest HMDA data came out, the 2019 ACS data will not be available until this fall.

Steps made to decrease gentrification disparity include boosting housing supply by easing local land use as well as easing building and zoning restrictions to make homes affordable, the Urban Institute said.

This would also lift barriers as to who can buy a home, and thus slowing down the pace of gentrification.

The report also pointed out that there are considerably fewer borrowers with low incomes who have mortgages, which is largely due to the lack of supply of houses for sale and mortgages at the lower end of the housing price spectrum.

Of households with moderate incomes, earning 50% to 80% of area median incomes, the share of new mortgages is 31%, compared to the 21% of the share of current homeowners.

For middle-income households, earning 80% to 120% of area median incomes, the share of mortgages is 27%, while rates of those already owning homes in the neighborhood are 21%.

Across the U.S., high-income households represent 45% of homeowners, 48% of all borrowers and 28% of borrowers in low- to moderate-income areas in 2018.



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