"Mortgage rates rose this week as the economy continues to recover. The 30-year fixed-rate mortgage rose to 3.00% from 2.94% the previous week. Mortgage rates are more likely to continue to rise than fall throughout the rest of 2021. The economy is growing faster than expected as more Americans get vaccinated against COVID-19 and resume traveling, going to restaurants, bars, events, and shows.
Nevertheless, mortgage rates are still very low, remaining near 3.0%. In fact, that’s down from an average 3.24% rate a year earlier when nearly 22 million people lost their jobs due to the pandemic. While 3 in 5 of them have already found a job since then, housing demand is very strong, outpacing housing supply.
With home prices at record highs due to supply imbalances, these low mortgage rates translate into significant benefits. Remember that a rate lower by 1% drops a monthly payment by $165. Considering that mortgage rates were over 6% in 2008, a rate lower by 3% decreases monthly payment by $525 for the typical buyer. Thus, although home prices are 17% and 66% higher compared to 2020 and 2008, monthly mortgage payment is higher by $150 and $180, respectively.
Moreover, while the typical renter spends about $1,200 for housing, consider that he could get a $320,000 mortgage loan with the same $1,200 payment. According to NAR, nearly 70% of metro areas have a median home price of less than $320,000. With 1 in 4 movers buying a home, expect these areas to gain movers, especially as teleworking will likely remain even after the pandemic."