The average mortgage rate fell to a record low sixteen times throughout 2020 and according to Freddie Mac’s Primary Mortgage Market Survey, released This Week in Real Estate, the mortgage rate for a 30-year fixed loan fell two basis points to the lowest rate in the survey’s near 50-year history during the first week of the new year. Below are a few newsworthy events from the first week of 2021 that influence our business:
Mortgage Rates Drop Even Lower to New Record of 2.65%. The average U.S. mortgage rate for a 30-year fixed loan fell two basis points this week to 2.65% – the lowest rate in the Freddie Mac’s Primary Mortgage Market Survey’s near 50-year history. This week’s mortgage rate broke the previous record set on Dec. 24. With this week’s record drop, there have now been 22 consecutive weeks when average mortgage rates have been below 3%. This year’s record low rates may be setting a new norm. Len Kiefer, Freddie Mac‘s deputy chief economist, noted every decade since the 1980s experienced a 2% drop decade-over-decade. With rates sitting at close to 12% nearly 50 years ago, declining patterns may mean 30-year mortgage rates could average 2% the rest of the 2020s. “Even just a year ago, that didn’t seem probable, and it’s certainly not my baseline forecast, but we’d have to acknowledge that there is a chance rates could continue their secular decline,” Kiefer said.
Residential Spending Continues to Lead Construction Numbers. Total spending on construction projects in the U.S. rose 0.9 percent in November compared to October. The U.S. Census Bureau estimated that the seasonally adjusted annual spending on all types of construction was $1.459 trillion during the month compared to $1.447 trillion the prior month, a 0.9 percent increase. The rate was up 3.8 percent from annualized spending ($1.406 trillion) in November 2019. Single-family construction spending, at a seasonally adjusted annual rate of $341.506 billion, was up 2.7 percent from the previous month and 18.1 percent higher than the prior November. New multifamily construction was flat compared to the previous month at a rate of $90.024 billion, but rose 15.8 percent year-over year.Residential spending rose 0.5 percent to $8.904 billion and was 24.3 percent higher than in November 2019.
Inventory Hits All-Time Low as Buyer Demand Explodes. The number of homes for sale sank to an all-time low in December, dipping below 700,000 for the first time ever, according to realtor.com’s Monthly Housing Trends Report. Home buyer demand remains high, causing bidding wars for the few homes on the market. Home prices are up by double-digit numbers compared to a year ago. The number of listings has dropped nearly 40% from a year ago. That equates to about 449,000 fewer homes for sale in December 2020 compared to December 2019, according to realtor.com® data. Overall, list prices continued to increase in December 2020. The median listing price rose 13.4% year-over-year in that month to $340,000.