Rent vs. Own Redux. What Higher Rates Mean For Buyers & Refinancers.

Homeowner and rental vacancy statistics from the Census Bureau provide an interesting set of numbers indicative of renting vs. owning a home. There are roughly 131 million housing units in the United States, with about 86% of them being occupied. Of those units, 57% are occupied by owners, 29% by renters, and 14% (about 18 million units!) are vacant.

Will they be filled with buyers? It is highly unlikely that 30-yr fixed rates for conventional loans will drop back to 4%, in spite of short-term improvements like yesterday. We’re now in a 5% to 5.5% trading range on rates, so we’ll see how that impacts buying. As for current data, mortgage applications jumped about 13% last week, with refinances about 66% of total apps. And last quarter Freddie Mac reported that 46% of refinance volume was “cash-in” where borrower brings in cash at closing to lower loan balance. Like companies, many households have saved cash and are deciding that buying down debt during periods of low rates is a good option. Companies face a slightly different set of options, including paying a dividend, buying another company, expanding existing facilities, etc.