Two of the most influential drivers of a real estate market are mortgage interest rates and jobs. The results of the Bureau of Labor Statistics February jobs report, released This Week in Real Estate, were surprisingly strong beating expectations by 80% with most coming from the sectors hardest hit by COVID-19. Employment growth as we transition into the spring selling season could mean even greater demand. Below are a few newsworthy events from the first week of March that influence our business:
Home Price Appreciation Broke an 8-Year Record in January. CoreLogic says home prices in January were 10 percent higher than a year earlier. It was the first double-digit increase in the company’s Home Price Index (HPI) since November 2013. Frank Martell, President and CEO of CoreLogic said, “Record-low mortgage rates were a significant driving force behind last year’s rebound in housing market activity. However, heavy competition for the few houses on the market drove home prices to historic highs, and mortgage rates are no longer enough to sway the affordability challenges for consumers. While new construction may help balance home prices towards the end of 2021, we may expect to see demand slow in the medium-term.” “Despite first-time buyers driving high demand, entry-level homes remain in short supply. Homes priced below 75 percent of the local median price had 14 percent annual appreciation, negating most of the benefits of record-low mortgage rates,” according to Frank Nothaft, CoreLogic’s chief economist. “When interest rates rise, the affordability squeeze for first-time buyers will become even more of a challenge.”
For The First Time Since July, Mortgage Rates Pass 3%. The average mortgage rate for a 30-year fixed loan rose 5 basis points last week to 3.02%, marking the first time since July that the industry has seen rates break above 3%, according to Freddie Mac’s Primary Mortgage Market Survey. “While purchase activity remains high, it has cooled off over the last few weeks and is currently on par with early March, prior to the pandemic,” Khater said. “However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.” After an arctic storm left purchase applications sluggish, mortgage activity bounced back last week almost immediately despite rising rates. “The housing market is entering the busy spring buying season with strong demand,” Joel Kan, the Mortgage Bankers Association’sassociate vice president of economic and industry forecasting, said. The 10-year U.S. Treasury note, a heavy-hitter in the swing of mortgage rates, has risen by half a percentage point since January, now teetering near 1.4%. Logan Mohtashami, HousingWire’s lead analyst, sees this as push in the right direction. “Last year I talked about how the 10-year yield should stay at a range between 1.33% and 1.60% in 2021,” Mohtashami said. “We are in a range between these two levels right now. We are no longer in a recession; this is where the 10-year yield should be.”
Job Growth in February May Signal Start of a Hiring Boom as the Economy Reopens. February’s surprisingly strong job growth signals that the economy could be at a pivot point and is about to enter a hiring boom. The economy added 379,000 jobs, well above the 210,000 expected, with most of them in leisure and hospitality, the sector hardest hit when the economy abruptly shut down a year ago. Economists say it would not be surprising to see multiple months now of job growth of at least 500,000. “The numbers are trending the right way,” said Michael Arone, chief investment strategist at State Street Global Advisors. “The labor market was the one holdout. Spring is upon us. You have that and you have the vaccine rollout.”
Did you know every home listed for sale with Berkshire Hathaway HomeServices Northwest Real Estate is eligible to receive no-obligation home warranty coverage the first six months the home is listed with our company?