So, this is interesting. In the U.S., homeownership has fallen to the lowest rate in almost twenty years. The homeownership rate actually peaked in 2004, but that isn’t really that shocking. It was madness back then! Lately, however, the gradual rise in home prices and the persistently tight credit market continue to act as barriers to entry for many young and/or first-time homebuyers. In fact, these days, first-time homebuyers make up less than one-third of the purchasing pool, and most of their purchases are for existing homes, meaning they aren’t scooping up new construction. This is likely due to the fact that new construction has tended to focus on the luxury shopper. We know this certainly seems to be the case in the Miami real estate market.
This actually leads us nicely to that particular topic, which is essentially the other end of the real estate spectrum. It turns out that banks are handing out a record number of mortgages for millionaires. Well, all of the borrowers seeking million dollar mortgages may not be millionaires, but they are probably close considering how much they are borrowing and what kind of homes they are buying. Even though many of these individuals “don’t have to borrow” the money to finance their real estate purchase, they are choosing to do so because money continues to be relatively cheap. Most of them don’t see the point in taking cash out of high-yield investments. It just doesn’t make sense to liquidate investments in a market that’s been pretty strong this year.
According to one property data firm, “the number of loans from $1 million to $10 million to buy single-family homes in the 100 largest metropolitan areas surged to more than 15,000 in the second quarter, the highest ever.” And, the $2 million price point seems to be the most popular, with sales of homes costing that much surging in all major cities and loan requests for this amount increasing 30% since last year. Of course, we’re happy to see a lot of activity in any sector of the real estate market. Nonetheless, we do hope that the banks’ borrowing standards loosen up a bit, and soon, to allow more individuals to participate in the market.