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Real Estate News 7/27/20

 “Record low interest rates are proving to be a powerful motivator and benefit for home buyers in an otherwise challenging time,” says Mark Fleming, Chief Economist at First American. First American recently released its proprietary Potential Home Sales Model for the month of May 2020. Highlights of the report showed that potential existing-home sales increased to a 4.92 million seasonally adjusted annualized rate (SAAR), a 6.2% month-over-month increase. This represented a 46.5% increase from the market potential low point reached in February 1993. The market potential for existing-home sales decreased 7% compared with a year ago, a loss of nearly 368,120 (SAAR) sales. “The early signs of a housing market comeback that appeared in mid-April, rising weekly purchase loan applications, continued to surge through May and into June. In fact, weekly purchase loan applications have now exceeded pre-pandemic levels,” Fleming said. “The two biggest drivers of the increase in May are slightly loosening credit standards, which allow more potential home buyers to qualify for financing, and the increase in house-buying power due to historically low interest rates,” he added. Source: First American

Tappable home equity, meaning the equity homeowners could borrow against while leaving a 20% buffer, rose to a record $6.5 trillion in the first quarter, Black Knight said in a report. More than 75% of homeowners with tappable equity have interest rates above 3.5%, the report said. With rates currently near 3%, the amount they would save each month likely would outweigh the cost of the transaction. While cash-out refis might provide support to the economy in the future, as people tap equity to renovate homes or pay down credit cards, the levels have fallen this year. “Driven by record-low 30-year rates on home loans, the first quarter saw overall refinance lending climb to a 7-year high,” the report said. “At the same time, the number of cash-out refinances, as well as the dollar value of equity withdrawn via refinance, fell for the first time since early 2019.” Rising home prices have increased the equity Americans have in their properties. Home values are based on what comparable properties in the neighborhood sell for, so even if homeowners aren’t thinking of putting a property on the market, it increases their equity when nearby homes sell at high prices. The median price of an existing home rose 4.9% in 2018 and 2019, according to the National Association of Realtors. It probably will increase 3.6% this year, the group said in a forecast recently. Source: HousingWire

Home prices continued to hold up on a national basis in April. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, reported a 4.7 percent annual gain in April, up from 4.6 percent in March. The National Index posted a 1.1 percent month-over-month increase before seasonal adjustment and an 0.5 percent gain after it. The 10-City Composite appreciated at an annual rate of 3.4 percent, unchanged from the March rate while the 20-City Composite's annual increase rose to 4.0 percent from 3.9 percent the previous month. The 10-City and 20-City measures had monthly increases of 0.7 percent and 0.9 percent respectively before seasonal adjustment and both posted 0.3 percent increases after adjustment. In April, all 19 cities reported increases before seasonal adjustment. Source: CoreLogic 

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