Mortgage rates dropped this week to 2.96% from 2.98% the previous week, following the trend of the 10-year Treasury yield. Although these mortgage rates won't likely last long at the 2% range, mortgage rates will remain historically low for the rest of the year. NAR forecasts mortgage rates to average 3.2% in 2021.
In the last several months, consumers saved like never before. Data shows that people typically saved around 9% of their income before the pandemic, while people saved 28% of their income in March. With personal income at record highs at $24.2 trillion, this means that consumers have already accumulated a large amount of cash.
In the meantime, hiring is picking up with 1 million jobs likely added in April. The U.S. Bureau of Labor Statistics will release the employment conditions for April tomorrow. Nevertheless, hiring is already higher than pre-pandemic levels in some areas. For instance, in Idaho, there are 38,500 more jobs than pre-pandemic. This translates to a 5% increase of payroll jobs compared to pre-pandemic. Similarly, hiring is 4% higher than pre-pandemic in Utah by 65,350 jobs. As people enter back into workplace, more Americans are expected to set their sights on homeownership, further boosting homebuying activity.
Additionally, remember that a home is among the biggest purchases a person will ever make — and with 87% of homebuyers financing their purchases, this also means that nearly everybody who wants to buy a home will also need a mortgage. Thus, expect homebuyers with weaker financial positions to face additional hurdles. For instance, Black Americans are 2.5 times more likely to be rejected for a mortgage than White Americans. While most of these applications were denied due to higher debt-to-income ratio and lower credit scores, it may be even more difficult for homebuyers from minority groups to get a loan in a such competitive market.