"A strong labor market and higher consumer and producer prices overshadowed COVID-19 concerns, raising yield and mortgage rates. The 10-year Treasury yield rose to 1.35% from 1.19% the previous week. Respectively, the 30-year fixed mortgage rate increased to 2.87% from 2.77%. Nevertheless, even with this increase, mortgage rates are still near historic lows. A year ago, the 30-year fixed-mortgage rate was 2.96% and the current rate is still lower than a month earlier.
So, what comes next? Mortgage rates will modestly rise in the following months as the economy continues to recover. NAR expects the 30-year fixed mortgage rate to make a slow climb to a 3% average for 2021.
Meanwhile, home prices continue to soar in nearly every local area across the country. According to NAR, the median sales price of single-family existing homes rose in 99% of measured metro areas in the second quarter of 2021 compared to one year ago, with double-digit price gains in 94% of markets. As a result, although mortgage rates are historically low, buyers need to pay a higher amount every month for their home loan compared to a year earlier when mortgage rates were 2.96%. Thus, the qualifying income rose to $60,200 in June. This is a $10,000 increase from a year earlier when the qualifying income was $49,600. If home prices continue to rise at this pace, expect homebuying activity to cool off later in the fall. However, even though the housing market may slow down, existing-home sales will still outperform this year. Remember that the real estate market is currently super-hot as activity is 23% higher than last year and 10% above the historical average. NAR predicts more home sales in 2021 by 6% on average compared to a year earlier."