I've long been talking about entry-level sales being very responsive to changes in mortgage rates. I thought I'd attempt to show this by comparing entry-level (studio, 1-bedroom) apartment sales against the 30-year fixed rate over the past decade. This week's release of the market report for 1Q 2012 brought the issue front and center since we saw the highest market share since 4Q 2009 and the share was higher than the balance of 2009 which I had previously dubbed "The Year of the First Time Buyer" due to the sharp drop in mortgage rates after the fall of Lehman and the federal tax credit for first time home buyers.
Well, they're back.
The attention paid to the luxury segment of the market for the past 2 years has grown tedious, so it's nice to see a new market pattern emerge.
Although mortgage underwriting has not measurably eased over the last year, were are seeing a push by the entry-level segment to take advantage of low mortgage rates. I think that people who were on the fence went out and bought, but unless rates plunge further, I am skeptical this share growth could continue (nor can rates remain this low for this long). The other factor that is driving this entry-level sales phenomenon has been the rise in rents (we'll be publishing our rental study next week) pushing people to rethink rent versus buy.
· Matrix [matrix.millersamuel.com]
· Three Cents Worth archive [Curbed]