Mortgage rates hit a new record low this week, decreasing the spread with the 10-year Treasury rate to a more normal range. Specifically, the 30-year fixed-rate mortgage fell slightly to an average 2.71% from 2.72% the previous week. NAR forecasts the 30-year fixed-rate mortgage to average 2.9% and 3.0% in the first and second quarter of 2020, respectively.Thus, fixed mortgage rates are expected to tumble to the lowest levels in history, hovering around 3.0-3.1% for the next year. In contrast, mortgage rates varied from 6-11% in the 1990s and 5-9% in the early 2000s. While these ultra-low mortgage rates boost homebuying activity to a 14-year high, inventory continues to drop, reaching record lows. Although housing starts rose 5% in October, housing construction lags far behind what is needed. Homebuilders report labor shortage as one of the main constraints of housing construction, which means that the industry needs more workers. In the meantime, millions of people lost their jobs during the pandemic, especially in the leisure and hospitality industry. Specifically, nearly 7.6 million people in the leisure and hospitality industry lost their job in April and 50% of them are still unemployed. By promoting vocational training, the unemployed may be able to find a job in the high paying construction industry. The typical employee in the leisure and hospitality industry earns nearly $1,800 per month compared to $5,000 — which is what a construction worker earns on average per month. Thus, states and municipalities should consider how to expand vocational skill training, ensure adequate funding, and actively promote these programs throughout their communities. Community colleges would also be a great venue to develop skills in carpentry, wood framing, and construction work-related skills that are currently in critically short supply.
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