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COVID-19 Continues to Fuel Desire for Homeownership

COVID-19 Fuels HomeownershipThe COVID-19 pandemic condinues to fuel American's desire to own a home. According to the National Association of Home Builders (NAHB)'s Housing Trends Report for the first quarter of 2021, 16% of American adults are considering the purchase of a home in the next 12 months. That's six points higher than 10% last year. The increase marks the third (and largest) year-over-year gain in the share of prospective buyers in the series history. First-time buyers account for 62% of prospective buyers.

Millennials are the generation with the fastest growth in adults planning a home purchase: the share of this group with plans to buy a home in the next 12 months doubled from 16% to 32% in the year ended in Qtr1’21, while other generations saw more tepid growth.

Similarly, the Northeast is the region of the country with the fastest growth in adults planning a home purchase: the share more than doubled from 8% to 20% in the year ended in Qtr1’21. The other three regions also saw growth (although less dramatic) in the share of adults planning a home purchase during this period.

At 85%, Generation Z has the largest share of prospective first-time home buyers, unchanged from a year earlier. Other generations saw slight declines in the shares buying a home for the first time.

At 65%, the Northeast has the largest share of 1st-time buyers, up from 58% a year earlier. The share also rose in the South (58% to 64%), but declined in the Midwest and West. Overall, more than half of buyers in every region are attempting homeownership for the first time.

Interest rates are slowly creeping up from historical lows (which significantly contributed to increased homebuying). Today's average 30-year fixed mortgage rate is 3.11%, 15-year is 2.39% and 5/1 ARM rates average 3.26%. The 30-year and 15-year rates are an increase of 4 basis points from seven days ago. Inflation, the unemployment rate, and the demand for housing are a few of the factors determining mortgage rates. As the economy recovers from the pandemic, we should see inflation rise, which will put upward pressure on mortage rates. However, the Federal Reserve wants to aid the recovery by keeping rates low, so expect to see historically low rates for the forseeable future.

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