The job market strengthened in February with 379,000 net new job additions. More jobs are very likely, due to the near certain passage of the $1.9 trillion stimulus package and from two million vaccinations per day. Another 9.5 million jobs are needed to get us back to pre-pandemic conditions. The good news on the latest jobs report also means that mortgage rates will likely trend higher in upcoming months because of some edging up in inflation pressure. The key 10-year Treasury borrowing rate has crossed over 1.6% this morning, more than doubling from the second half of last year. The record-low mortgage rate of 2.7% in December and January is long past. An average rate of 3.3% is likely for the remainder of the year.
The home-sales market will experience countervailing forces of the higher push from more jobs, but also the pull back of higher mortgage rates. We will have to wait to see which force will be stronger. Back in 2018, the economy roared with 2.3 million job creations, but home sales modestly declined because mortgage rates rose from 4.0% at the beginning of the year to 4.6% by the year’s end. This time, rate increases will be occurring but will be well below 4.0%.