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Last hurrah for mortgages? Maybe.

Plus, a $15,000 down payment assistance program would help some renters become homeowners, homeownership rates slip in some cities and improve in others, home equity tops $54,000, and the happiest cities in the state.

Home-seekers hoping to buy and homeowners looking to save increased mortgage applications to the highest level in almost 14 years.

But the mortgage madness could be the boom before the bust, as interest rates have inched higher five straight weeks to a level last seen in early July, according to Freddie Mac.

Industry tracker Black Knight says fewer than 13 million homeowners could benefit from refinancing their mortgages with the higher rates as of March 4, a 29% decline in the past three weeks — and the lowest figure since May 2020. 

Lenders approved 3.51 million mortgages during the fourth quarter, a 5.5% increase compared to the third quarter — and up 48% from a year ago, according to ATTOM Data Solutions. It’s the most mortgages since second-quarter 2007.

Refis rise, purchase loans slide

Almost two of every three loans were for refinancing mortgages during the fourth quarter, ATTOM Data reported. Lenders issued 2.23 million refis during the final three months of the year, a 12% increase from the third quarter and up 71% from a year ago.

But fewer than one of every five (18%) homeowners refinanced with their current mortgage lenders, the lowest share on record, according to Black Knight.

Refis helped offset a slight decline in mortgages for purchasing homes, which dipped 3.8% from the third quarter to 1.04 million loans, an impressive 38% increase from fourth-quarter 2019. While the quarterly decline is noteworthy, it’s far from worrisome. It’s the smallest quarter-to-quarter decline since 2000.

Mortgage activity, thanks to record-low rates during the second half of 2020, has been robust despite Covid and the subsequent lockdown and pandemic-prompted recession during the past year. Home sales idled during the first few months of Covid, but quickly rebounded and surged when consumers wanted a safe place to live and work from with the pandemic.

“The rising (mortgage) numbers left another in a long string of markers showing how the housing market has mostly avoided economic damage stemming from the virus pandemic,” says Todd Teta, chief product officer for ATTOM Data. “As with other housing market measures, the appetite for loans among homeowners and home-seekers in the coming months remains uncertain.”

Feature photo of a Los Angeles-area neighborhood. Trek and Shoot/Shutterstock

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A down payment program could help some renters become homeowners. Feokistoff/Shutterstock

$15,000 from Uncle Sam would open the door to homeownership for some renters

President Joe Biden’s campaign focused largely on defeating Covid and healing a divided nation. But he also detailed a $15,000 down payment assistance plan that could help open the door to homeownership for millions of renters nationwide.

Zillow recently crunched the data and determined that more than one of every four renters nationwide — about 9.3 million households — could buy a house with $15,000 in down payment assistance. A large majority of renters say saving for the down payment is the most difficult barrier to homeownership.

The down payment assistance for first-time buyers would help some but not a ton of Californians, according to the Zillow report.

Fewer than 20% of renters in the state could buy

Two of every five renters (about 40%) in Pittsburgh, Cincinnati, Cleveland, Virginia Beach and St. Louis could afford to buy a home and spend less than 30% of their household income on the monthly mortgage within their cities, according to Zillow. The figure is based on a down payment of 3.5%, possible with Fannie Mae and Freddie Mac-guaranteed loans.

But in high-cost California — where the median home price is about $430,000 more than the national figure — the down payment assistance would help a much smaller percentage of renters. California has five of the cities with the lowest percentage of renters that would be helped with down payment assistance.

Sacramento had the largest percentage of renters that would benefit with $15,000 in down payment assistance at 17.3%. Less than one of every five renters (18.3%) in the capital region could buy a home under the proposed program.

President Biden discussed a down payment assistance program while campaigning.

San Francisco, where the average price is more than $1.5 million, has the second-highest rate at 16.3%. The city, often the most expensive in the state, benefits from higher income for many residents, especially compared to the Sacramento region and Southern California.

Down payment assistance would help 12.8% of renters become homeowners in San Diego and 12.1% in San Jose, another city where annual income for quite a few households tops $100,000. Los Angeles has the lowest percentage of renters helped by a $15,000 down payment program at 10.1%.

Of course, one of every six to 10 renters in California benefiting from a federal down payment assistance program is far from shabby, but nowhere near the impact found in the Midwest and Southeast. And there are some regions of the state — such as the Central Valley and Far North (think Chico to Eureka) — where those dollars would go a lot farther.

But the Zillow report clearly shows how difficult buying a home is in the state, especially for those pinching pennies to save enough money for a down payment.

San Jose-area’s homeownership rate increased about 8 percentage points in five years, the largest gain in the state. PBK PG/Shutterstock

LA homeownership rate slips, San Jose surges

For a large majority of Americans, homeownership is the most accessible — and often the best — way to build wealth.

As detailed in the next blog item, equity allows consumers more financial options while also meeting the most basic need of housing. 

But buying a home is far from easy for many residents in the state, according to the latest Census Bureau homeownership rates

In fact, Los Angeles-Long Beach had the lowest homeownership rate in the nation at 48.3% during the fourth quarter, compared to 49.1% during the final three months of 2015.

Inland Empire boasts the best homeownership rate

Now, homeownership rates are based on consumers that bought in December 2020 — or those who have owned their home for decades. 

The Inland Empire (Riverside and San Bernardino counties) has the highest homeownership rate among the major metro regions in the state at 65.8%, up from 62.4% five years ago. It should be noted that many residents priced out of Los Angeles buy homes in the Inland Empire, where prices are about $150,000 cheaper, according to the California Association of Realtors.

Sacramento-Roseville — one of the hottest housing markets in the nation — was a close second at 63.1%, up half a percentage point from 2015. 

San Diego finished in third-place at 56.3%, followed by Fresno at 55.8%.

A tale of two Bay Areas

Bay Area cities San Francisco and San Jose are going in opposite directions. 

San Francisco’s homeownership rate has declined to 51.6%, an almost 8 percentage-point drop from five years ago. Many San Francisco homeowners cashed in, selling their homes to investors and relocating to lower-priced regions, especially with the pandemic during the past year.

San Jose, thanks to those hard-to-believe gains on the stock market and hefty paychecks, had a more than 8-percentage point increase in homeownership, reaching 53.7% in fourth-quarter 2020, according to the Census Bureau.

California’s homeownership rate was 55.6% in December 2020, the second-lowest in the nation, behind the 43% in Washington, D.C. New Hampshire has the highest homeownership rate at 76.1%.

The average California homeowner with a mortgage, like those in Menifee, enjoyed a $54,000 increase in equity in 2020. Bonandbon/Shutterstock

California’s home-equity gains are double the national average

It’s hard not to be at least a little happy if you’re a homeowner in California. 

The average California homeowner with a mortgage gained $54,500 in equity during the past year, easily the highest of any state — and more than double the national figure, according to CoreLogic.

California’s median home price surged to $699,900 in January, a 22% increase compared to a year ago, greatly boosting homeowner equity (fourth item in CHN Blog) — the amount of money owed on a mortgage compared with the market value.

California’s big-time equity gains help homeowners tap into their homes to pay off credit card debt or car loans, fund a home-improvement project or just give them some financial breathing room.

The hefty equity gains almost eliminated the percentage of underwater mortgages in the state. Only 0.7% of homeowners in San Francisco owed more than the market value of their property during the fourth quarter, the lowest percentage in the U.S. Los Angeles had the second-lowest negative equity rate at 1.0%.

Fremont in the Bay Area is the happiest city in California — and the nation. Sundry Photography/Shutterstock

California has five of the nation’s 15 happiest cities

Covid has definitely caused much concern and heart-wrenching pain nationwide — and in California. So, being happy where you call home can have a dramatic effect on your long-term outlook.

Three California cities finished among the happiest cities nationwide, including first-place Fremont, where residents scored the community high on emotional and physical well-being and community and environment

San Jose finished in fifth-place on the national list — and second in California — followed by Santa Rosa at No. 10, according to WalletHub. Irvine and San Francisco finished in 12th- and 13th-place on the list (and fourth and fifth in the state).

Sad times in San Bernardino 

WalletHub crunched data on positive-psychology research to determine the happiest cities in the U.S. Happiness was based on 31 key indicators, including the depression rate and income-growth rate to average leisure time spent per day.

So, not to be a downer, but what are the least happy places in the state? Avoid San Bernardino at No. 165 of the 182 places researched. Bakersfield, Fresno and Stockton are also far from happy places, according to the annual report.

Just for fun. Anaheim — home to Disneyland, the so-called happiest place on Earth — finished at No. 41. Not too bad for a theme park that has been closed for a year due to the pandemic, but reopens April 1. That will make a lot of people happy.

Ron Trujillo

Ron Trujillo

Longtime business journalist-turned-communications executive who enjoys reporting on residential real estate in his spare time.