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Home Buyers Struggle to Take Advantage of Record Low Rates Before They Disappear

January 9th, 2021 1:01 PM by Jackie A. Graves, President

Young families looking to buy a home stand to save significant sums of money thanks to low mortgage rates, but the reduced number of homes for sale nationwide poses a challenge.

Mortgage rates started 2021 by falling to a fresh record low, but changes coming to Washington appear poised to push interest rates higher in the coming weeks.

The 30-year fixed-rate mortgage averaged 2.65% for the week ending Dec. 31, down two basis points from last week and one basis point from the new record low of 2.66% set two weeks prior, Freddie Mac FMCC, -4.81% reported Thursday.

The 15-year fixed-rate mortgage fell one basis point to an average of 2.16%, representing a record low for that mortgage product. Meanwhile, the 5-year Treasury-indexed hybrid adjustable-rate mortgage rose by four basis points to 2.75%.

While rates dropped this week, there are signs that they could soon rise. Generally, mortgage rates track the movement of long-term bond yields, particularly the 10-year Treasury note TMUBMUSD10Y, 1.120%. On Wednesday, the 10-year Treasury rose above 1% for the first time since March, in response to the results in the runoff elections for the U.S. Senate in Georgia.



“The future outlook for mortgage rates remains uncertain this week amid a changing landscape in Washington,” said Danielle Hale, chief economist at Realtor.com. “The outcome of the Georgia Senate race seemed to indicate the possibility of less gridlock, making another stimulus a more realistic possibility.”

Hale cautioned though that markets have not fully reacted to the chaos that unfolded at the U.S. Capitol on Wednesday when violent Trump supporters stormed the building, though the 10-year Treasury’s yield did move higher following the certification of President-elect Joe Biden’s win early Thursday morning.

Additionally, other economic data could put a damper on any upward movement in interest rates. The direction mortgage rates take is “largely dependent on the economy’s ability to improve,” said Zillow ZG, +2.10% economist Matthew Speakman, who added that “the first test of this will be Friday’s December jobs report.” If the number of jobs added and unemployment rate do not meet expectations, the upward movement in rates could slow.

Either way, home buyers will struggle to gain footing in the current housing market to take advantage of these eye-popping interest rates, experts say. A new analysis from Realtor.com found that the number of homes for sale has dropped below 700,000 as of December, down nearly 40% from the year prior. That figure represents a record low since Realtor.com has been tracking this data.

“Homebuyers can still take advantage of low rates to offset the steep rises in home prices that we’ve seen in most areas over the last year, but finding a home will continue to be challenging,” Hale said.



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