Mortgage Rates May Begin Rising as New Home Construction Accelerates

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Through the first five (5) months of 2021 the country has experienced five (5) consecutive months of positive job gains as reported This Week in Real Estate by the Bureau of Labor Statistics. Additionally, the Q1 2021 Home Building Geography Index shows that the single-family home construction growth rate is strongest in areas with the shortest commute times. Below are a few newsworthy events from the first week of June that influence our business: 

New Home Construction Accelerating in Areas With Shortest Commute Times in the U.S. The first quarter Home Building Geography Index (HBGI) indicates that home building not only continued to overperform in lower-cost markets like suburbs and exurbs but also expanded the most rapidly for single-family and multifamily construction in areas with the shortest commutes,” said NAHB Chief Economist Robert Dietz. While longer-commute areas have a much greater market share in single-family home building, the single-family construction growth rates in the first quarter of 2021 were strongest in the areas with the shortest commuting times. Continuing a trend from the beginning of last year, the HBGI indicates that low-density, low-cost markets continued to outperform other regional geographies with respect to home construction at the start of 2021. 

Mortgage Rates Spend Another Week Below 3%. Mortgage rates were on the rise last week but remained just below 3%, offering borrowers another opportunity to lock in historically low rates. Still, the National Association of Realtors (NAR) cautions that borrowers should expect mortgage rates to increase modestly in the following months as the economy continues to recover. NAR forecasts the 30-year fixed-rate mortgage to average 3.20% in 2021. 30-year fixed-rate mortgages averaged 2.99%, up from last week’s 2.95% average. Last year at this time, 30-year rates averaged 3.18%.    

Solid Job Gains in May. Job gains accelerated in May as vaccination rates increased and COVID-19 restrictions lifted. Total payroll employment rose by 559,000 and the unemployment rate decreased to 5.8% in May. The May decrease in the unemployment rate reflected the decrease in the number of persons unemployed (-496,000) and the increase in the number of persons employed (444,000). It marks the fifth consecutive gain. Currently, residential construction employment exceeds its level in February 2020.

Did you know every home listed for sale with Berkshire Hathaway HomeServices Real Estate Professionals is eligible to receive no-obligation home warranty coverage from American Home Shield or 2-10 Home Warranty the first six months the home is listed with our company?

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