Mortgage rates fell further this week, following the trend of the 10-year Treasury yield. Specifically, the 30-year fixed mortgage rate dropped to 2.73% from 2.77% the previous week. Expect mortgage rates to continue to hover around record lows. The Federal Reserve reassured us yesterday that it will keep interest rates and its bond-buying program unchanged. When the Fed buys bonds, the money supply increases and interest rates remain low, encouraging consumers and businesses to borrow and spend. With more people coming off unemployment, the housing market would be even stronger this year.
Indeed, home sales activity rose to its highest in 14 years in 2020, contributing significantly to the recovery of the U.S. economy. According to NAR, existing-home sales totaled 5.64 million in 2020. This is an increase of 6% from a year earlier and the most since before the Great Recession. This winter may also be one of the best winters for the housing market. Home sales activity typically slows down in the winter as the slowest months of activity are November, December, January and February. Typically, 810,000 homes are sold during November and December. However, more than 1 million units were sold in the last couple of months of 2020. As the activity in the slow months is higher than last year’s activity, this should suggest that existing-home sales activity might be busier during the peak season as well. NAR is forecasting existing-home sales to rise more than 10% in 2021.