A strong economy and affordable mortgage rates have led housing sales to move along at a near-record pace, with the U.S. homeownership rate at an all-time high, mortgage economists said last week.
The National Association of Realtors reported existing home sales in September at an annual rate of 5.14 million units, down slightly from the 5.28 million unit pace in August.
Additionally, the Department of Housing and Urban Development announced that the homeownership rate rose from 67.2% in the second quarter to 67.7% in the third quarter. HUD Secretary Andrew Cuomo noted that the new record exceeds the 67.5% homeownership goal set by the Clinton administration back in 1995.
Since the end of 1994, more than seven million families have become homeowners, and the homeownership rate among minorities and in urban areas is also at all-time highs, the secretary said.
In its fourth quarter economic outlook, Freddie Mac economists report no recession on the horizon, continued affordable mortgage rates and anticipate a near-record year for total home sales - 5.97 million units.
According to Freddie Mac, the average mortgage cost of buying a typical house has gone up since reaching the historic low point on the Freddie Mac survey of 6.49% in October 1998. The latest Freddie Mac mortgage rate survey result showed the 30-year fixed-rate mortgage at 8.21%.
The extra interest cost from the higher mortgage rate means that a typical $113,000 30-year fixed-rate mortgage purchased by Freddie Mac would cost about $805 per month (principal and interest only) versus $712 per month.
FHLMC economists also predict that adjustable-rate mortgages will represent about twice as many closed mortgages in 2000 as they did in 1999.
Also last week, National Association of Home Builders chief economist David Seiders predicted that the interest rate on 30-year fixed-rate mortgage will be around 7.9% throughout 2001 and that single-family housing starts will hold steady at an annual rate of about 1.21 million next year.
However, Seiders said "a downsizing is under way" in single-family home sales, which he predicted will level off at a 832,000 annual rate for new home sales in the second quarter of 2001 and at a 4.71 million annual rate for existing home sales.
Seiders also told the annual NAHB construction forecast conference that the Federal Reserve Board is not likely to raise interest rates next year unless the newly elected president gets Congress to pass huge tax cuts or spending packages.
The National Association of Realtors also announced last week that the sales of existing homes slipped 2.7% to 514,000 units (annualized) in September from the previous month's 528,000 units, according to figures compiled by the NAR.
NAR chief economist David Lereah said a slight easing in sales was expected, given the fact that sales spiked by 9.5% in August.
"What we saw in August was a lot of families jumping into the market to take advantage of favorable conditions," Lereah said. The August surge was caused by declining interest rates, pent-up demand and pressure by families to close before the start of a new school year.