Areas with a higher share of homeowners that have a mortgage are more likely to be affected by rate movement than those where more people own their homes outright. TAMIR KALIFA/THE NEW YORK TIMES

Austin Business Journal writes, "Relief on housing costs from interest-rate cuts issued by the Federal Reserve last month may not be as straightforward as some would-be homebuyers might expect. But some areas of the country are poised to feel the impacts of rate cuts more significantly than others.

A recent analysis by Realtor.com found 60.2% of homeowners in the U.S. lived in homes with a mortgage while 39.8% of owners owned their homes free and clear. But the share of mortgaged homeowners versus those who owned their homes outright vary — sometimes significantly — by state.

And, of course, areas with a higher share of homeowners that have a mortgage are more likely to be affected by rate movement than those where more people own their homes outright.

Among the 50 states and the District of Columbia, Washington, D.C., has the highest share of owner-occupied homes with a mortgage, at 77.3%, according to Realtor.com. That was followed by Maryland, at 70.7%; Colorado, at 69.1%; and Utah, at 68.1%.

On the other end of the spectrum, the states with the lowest percentage of homes with a mortgage were West Virginia (44.4%), Mississippi (48%) and Louisiana (51.7%).

"Interestingly, our analysis finds that markets with higher homeownership rates tend to have a greater share of outright ownership," wrote Jiayi Xu, an economist at Realtor.com, in the report. "Additionally, there is a strong correlation between a larger proportion of older homeowners (aged 65 and above) and the prevalence of outright homeownership."

Notably, the share of homeowners with debt has overall dropped in recent years, Realtor.com also found. In 2010, the share of homes with debt was 67.2% while the share of outright ownership was 32.8%. 

Mortgage rates may not continue to fall

While the 30-year fixed-rate mortgage has moved down in recent weeks and the Fed's rate cuts have been widely celebrated across the real estate industry, rate movement isn't consistently downward.

In fact, while 30-year fixed-rate mortgages fell from an average of 6.8% in 2023 — with the peak around 7.8% last fall — to about 6.1% as of Oct. 3, rates have since risen again, to about 6.6%, according to Zillow Group Inc. (Nasdaq: ZG) data.

"Recent fluctuations in mortgage rates are causing potential monthly payments to shift quickly for homebuyers," Zillow researchers wrote in the report. "This volatility also impacts households who purchased homes previously, changing the math on whether refinancing could help lower their monthly payments."

There's also no guarantee mortgage rates will continue to fall, even if the Fed cuts its key rate further, Zillow researchers noted.

Data released today by the Mortgage Bankers Association found, for the week ending Oct. 4, mortgage applications decreased 5.1% from the week prior, earlier. The MBA's Refinance Index decreased 9% from the previous week, although it was 159% higher than the same week one year ago. The group's unadjusted Purchase Index, meanwhile, increased 0.1% from the prior week and was 8% higher than the same week one year ago.

Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement conventional loan refinances tend to be more responsive to a change in mortgage rates.

"... the decision to buy a home is impacted by many factors, not just the level of mortgage rates," Fratantoni continued. "The largest constraint for many prospective homebuyers over the past year had been the lack of inventory. Now, there are more homes available in many markets across the country, and with mortgage rates still low compared to recent history, at least some potential homebuyers are moving ahead.”"

 

Source: Austin Business Journal 

Written by: Ashley Fahey

Published: October 9, 2024

 

Posted by Grossman & Jones Group on

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