Mortgage rates hit another record low this week for the thirteenth time this year. Following the trend of the 10-year Treasury yields, the 30-year fixed-rate mortgage fell by 12 percentage points to an average of 2.72% from 2.84% the previous week. Investors are skeptical about the pace of economic recovery although the latest vaccine news is positive.
However, these ultra-low mortgage rates make homebuying more attractive, boosting activity to the highest level since 2006. According to NAR, in October, existing-home sales rose to 6.85 million by 27% with activity in the Midwest and South reaching all-time highs. Nevertheless, inventory continues to fall widening the gap between housing demand and supply. While inventory was limited before the pandemic, it is even more limited now. As a result, home prices continue to rise, weakening housing affordability in many areas.
Moreover, home construction rose in October with single-family starts reaching the highest production rate since 2007. In the meantime, builder confidence soared to record highs. The combination of strong demand, low inventory, and a record level of homebuilder confidence is expected to continue to boost new home construction in the months ahead. With mortgage rates hovering at record lows, more houses will be built as demand rises and homebuilders can borrow money at a cheaper rate to finance the construction.