Share"Mortgage rates dropped further this week although the 10-year Treasury yield rose in response to higher inflation. Specifically, the 30-year fixed rate mortgage fell to 2.94% from 2.96% the previous week. With the job market adding fewer jobs than expected in April, mortgage rates continued to stay below 3%. Nevertheless, expect rates to increase in the rest of the year. NAR forecasts the 30-year fixed rate mortgage to average 3.2% by the end of the 2021.
Although mortgage rates may rise in the following months, homebuying activity won't likely be affected. Keep in mind that rates are hovering into record lows and they will remain historically low for a longer period. Nevertheless, due to low mortgage rates and favorable demographic trends, current homebuyers are having difficulty in finding a home to purchase as there are not enough homes for sale and there are many buyers for the same home. As a result, home prices continue to surge at record highs in many areas across the country.
Take a look here how many homes a household earning $100K can afford to buy now versus 2 years ago.
Thus, due to weaker affordability and lower inventory, there are about 450,000 fewer homes available for sale that this household can currently afford to buy compared to 2 years earlier.
While we have underbuilt for more than a decade, in the wake of the housing crisis of 2008, millions of homes that were once owner-occupied became rental units, further dropping the number of homes for sale today. In fact, from 2005 to 2019, the number of single-family houses that are rented grew by over 3.1 million. Typically when families renting a single-family home move to another residence, another renting family moves in the house they leave, while most owner-occupied homes are sold to another owner occupant when the first owner moves away. There are currently 1.7 million homes that are renter occupied. Thus, the conversion of a single-family home from owner-occupied status to rental status has major implications on the number of homes available for sale in the future."
