Feb 7, 2020 - Economy & Business

Americans want to buy homes, but they're disappearing

Reproduced from Fannie Mae; Chart: Axios Visuals

The steady decline in U.S. interest rates helped the housing sector recover from its malaise in early 2019, and the momentum is continuing so far in 2020.

Yes but: Prospective homeowners are finding it increasingly difficult to find a home, as the lower rates have brought on increased selling prices and fewer available homes.

Driving the news: National housing inventory fell by nearly 14% in January — the steepest year-over-year decline in more than four years, according to a survey released this morning from Realtor.com.

  • The supply of homes for sale in the U.S. is now at its lowest level since Realtor.com started tracking the data in 2012.
  • The company also notes that there is a supply shortage at every price tier, but especially in entry-level homes. The number of properties priced under $200,000 fell by 19% year over year.

What's happening: As mortgage rates decline, applications are spiking and so are prices.

  • The 30-year fixed rate for a mortgage fell to an average of 3.71% this week, its lowest level since October, the Mortgage Bankers Association reported Wednesday.
  • The refinance rate jumped by 15% to the highest level since June 2013, MBA said. Compared with a year earlier, it was up 183%.
  • Conversely, MBA's purchase index fell by 10% because of the challenge buyers had finding homes they could afford.
  • National home prices increased 4% year over year in December and are forecast to increase by 5.2% from December 2019 to December 2020, according to the latest report from CoreLogic released Tuesday.

What they're saying: “With fewer homes coming up for sale, we’ve hit another new low of for sale-listings in January,” Realtor.com chief economist Danielle Hale said.

  • “This is a challenging sign for the large numbers of millennial and Gen Z buyers coming into the housing market.”

Go deeper:

Go deeper

U.S. fixed mortgage rates drop to three-year low

Illustration: Sarah Grillo/Axios Visuals

The average rates for 15- and 30-year fixed mortgage dipped to their lowest levels in three years this week, per new data from mortgage giant Freddie Mac.

The big picture: The bottom rung of the housing ladder has now ascended beyond the grasp of millions of Americans, regardless of whether they want to rent or buy, Axios' Felix Salmon reported last week. Home prices have surged in recent years.

The new housing crisis

Illustration: Sarah Grillo/Axios

Rising house prices don't cause lenders to lose money, or economies to implode. But the bottom rung of the housing ladder has now ascended beyond the grasp of millions of Americans, regardless of whether they want to rent or buy.

Why it matters: When house prices fall too much, the rich and powerful lose money. That, in turn, means central banks around the world will swing into action to try to save the economy. When home prices rise too much, on the other hand, there's no such urgency on the part of policymakers.

The State of the American City: San Francisco

Berkeley Mayor Jesse Arreguín on stage with Axios Co-founder Mike Allen. Photo: Chris Constantine for Axios

On Wednesday morning in San Francisco, Axios Co-founder Mike Allen hosted a series of one-on-one conversations to discuss the future of affordable housing in the Bay Area.

Sen. Scott Wiener, California State Senate

Sen. Scott Wiener focused on the critical need for housing development in the Bay Area, particularly around public transit, and highlighted how affordable housing can work in tandem with climate goals.

  • On the contentiousness of housing politics: "Housing politics, unfortunately, are a little bit like climate and gun safety politics. The people get it. This is not an issue of popular sentiment...But like gun safety and climate, it has not trickled up to elected officials in the way that it needs to. "
  • On focusing development around public transportation: "We don't want to build sprawl and destroy farmland and force people into two-hour commutes to increase carbon emissions and clog the freeways...So it's very, very important from a climate perspective and a housing perspective."
Alice Carr, Head of Community Development Banking, JPMorgan Chase

Head of Community Development Banking at JPMorgan Chase, Alice Carr, discussed the role of the public and private sector in housing development in her View from the Top segment.

  • On the public and private sectors working together to address this challenge: "Low-income housing tax credits are the primary driver for building new affordable units throughout the country. And that's policy-driven. That's a federal commitment to affordable housing."
  • On finding multi-pronged solutions to deeply entrenched problems: "We know that housing tax credits are not going to solve a national affordable housing crisis [alone]. We are behind as a country in providing the number of units we need throughout the country, not just affordable and subsidized housing. So we really need to focus on ways of increasing housing production across the spectrum."
Catherine Bracy, Co-founder and Executive Director, TechEquity Collaborative

Co-founder and Executive Director at TechEquity Collaborative, Catherine Bracy, highlighted the importance of tech workers and employers showing up in conversations around affordable housing and engaging more deeply in the community.

  • On growing a tech economy: "I think growth should lift all boats and that we need to focus on policy solutions that are going to make it possible for a growing tech economy to create opportunity for everybody who lives here, whether they work in the tech industry or not."
  • On tech workers throwing their support behind equitable housing initiatives: "I think most tech workers agree with [increasing affordable housing]."
Mayor Jesse Arreguín, Berkeley, California

Mayor Jesse Arreguín discussed the importance of preventive policies around homelessness, concentrating housing close to where jobs are located, and making sure that housing is more equitably distributed throughout the region.

  • On the need for affordable housing: "[Homelessness] is one of the most visible challenges that we are experiencing, not only in Berkeley but throughout the state of California...I think it really is a symptom of how broken our economic system is that we have people that are finding themselves without housing. We need to build more affordable housing and make sure people stay housed."
  • On making sustainable development plans for the future: "We need to look at how we are going to grow as a region expecting 2.4 million more people to come to the San Francisco Bay region. Where are they going to live? How are they going to commute to work and to home? And that means building housing in areas where there's been active resistance to building housing."

Thank you JPMorgan Chase for sponsoring this event.