Economists' Outlook

Housing stats and analysis from NAR's research experts.

Instant Reaction: Mortgage Rates, January 14, 2021

As expected, mortgage rates rose this week, following the trend of the 10-year Treasury yield in the last couple of weeks. The 30-year fixed mortgage rate ticked up to 2.79% from 2.65% the previous week. However, this increase in rates shouldn’t raise any concerns for would-be homebuyers. The 10-year Treasury yield, which is the key benchmark of mortgage rates, slipped by 5 basis points yesterday as data shows that inflation remains subdued. Although inflation doesn’t have a direct impact on mortgage rates, the 10-year Treasury yield responds quickly to inflation movements.

On the jobs front, more Americans filed a new unemployment claim last week. In fact, the number of initial claims rose to 1.15 million, the highest level since the end of July. It is an increase of 231,335 from the prior week, as some re-closing of business activity in some states is contributing to more layoffs. Across the country, fewer small businesses are open, nearly 30% down compared to pre-pandemic.

Both employment and inflation are expected to pick up later this year. While the COVID-19 vaccine is becoming available to more Americans and the second stimulus package is on the way, the re-opening of businesses will likely put upward pressure on prices. Therefore, mortgage rates will also rise, but only slightly. NAR is forecasting the 30-year mortgage rate to average 2.9% and 3.0% in the first and second quarter of 2021, respectively.

Nevertheless, housing demand will remain very strong. Looking beyond the median, households earning $100K can afford to buy more than 60% of homes currently listed for sale nationwide. This translates to nearly 770,000 homes across the country as of November. Respectively, households earning $75K can afford to buy nearly half of the homes that are available for sale.