Mortgage rates ticked up, after falling to yet another record low last week for the 11th time since the beginning of the year. Specifically, the 30-year fixed-rate mortgage rose slightly to an average of 2.81% from 2.80% the previous week.
The news comes after the Department of Commerce released the new GDP report earlier this morning, with GDP rising tremendously by 33% in Q3 2020 compared to the previous quarter. The United States certainly experienced its fastest three months of economic growth on record. Additionally, the housing market is one of the sectors that significantly contributed to the recovery of the economy.
First of all, with these ultra-low mortgage rates, homebuying activity has increased by nearly 70% compared to May spurring homebuilding and many durable consumer goods industries. In the meantime, based on another important indicator, the homeownership rate rose by 2.6% in Q3 2020 compared to a year earlier with African Americans experiencing the largest gains followed by Hispanics. Thus, more people from minority groups are able to become homeowners than pre-pandemic.
Meanwhile, there is clearly a strong consumer interest in remodeling with the remodeling market booming during the pandemic. While homeowners spend a considerable amount of time at home, they realize what they actually need to update and reconfigure in indoor and outdoor spaces for the “new norm” of telework and virtual learning. According to NAR, 2 in 3 owners have already remodeled their homes or have thought about it. While these ultra-low mortgage rates lower borrowing costs, more homeowners are expected to do major renovations this year and next.
With mortgage rates hovering near record lows, expect real estate to continue to stay strong, boosting economic growth.