The 30-year fixed-rate mortgage remained flat this week after reaching a new record low a week earlier to an average of 2.71%. NAR forecasts the 30-year fixed-rate mortgage to average 2.9% and 3.0% in the first and second quarter of 2020, respectively.
These ultra-low mortgage rates make homebuying more attractive, boosting activity to the highest level since 2006. In the meantime, inventory hits all-time lows. The rising imbalance between demand and supply for housing is putting upward pressure on home prices. Home prices rose 16% in October compared to a year earlier. However, wages rose 9% during the same period. Thus, home prices are growing nearly twice as fast as wages, in terms of percentage change.
However, when we compare the amount increase of the mortgage payment with that of wages, housing is still affordable due to lower mortgage rates. Although home prices rose 16% compared to a year earlier, monthly mortgage payment for a 30-year fixed-rate increased by $10. In contrast, the typical American earns monthly $380 more than a year earlier. Thus, expect homebuying activity to remain very strong in 2021.