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Mortgage Rates Hit Record Lows Again – Real Estate Market Update

Kevin Graham5 minute-read
January 14, 2021

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We’re back for another look at what happened in real estate. We’ll go over the most important news and insights you can share with your clients.

The Big Story

The big story of the month so far is that mortgage rates have once again hit a new record low. I feel like I’m saying that so often lately that I’m going to start to sound like a broken record. However, the absolute most important thing you and your clients should know is that there is likely never going to be a better time to get a mortgage.

If you’re a real estate agent, this should give you the motivation to strike while the iron is hot. It’s hard to imagine rates getting any lower than they are now.

Moreover, you have the chance to build on that relationship with past clients even if they’re not looking for a home right now. If they haven’t refinanced in a while, it could be time to give their current rate a second look to see if they can get into a better position.

News You Can Use

The headlines here are put together with assistance from Econoday.Let’s keep rolling!

Retail Sales

Retail sales were down 1.1% overall gross all categories, but more importantly for the group that reads this report, building materials were actually up 1.1% in November. What’s more, these are up 10.9% since February.

That’s important because it shows how strong the demand is for housing and home improvement at this point.

Housing Market Index

The housing market has been incredibly hot and it’s only natural that at some point, it gets taken off the boiler. With that in mind, home builder sentiment was down 4 points to 86 in December, but it’s still the second highest the index is been in 35 years of record-keeping.

There were 4-point declines in each of the major components of the index. Present sales settled at 92. Meanwhile, sales over the next 6 months come in at 85. Finally, the traffic of possible buyers touring homes settled at 73.

New Residential Construction

Housing supply is a major concern right now because it’s a very tight market. People are having trouble finding the house they want at an affordable price.

Completed construction is most likely to have an immediate impact on the market. Unfortunately here, completions are down 4.1% compared to October. Single-family completions were down just 0.6%, however, at 879,000. Overall completions were 1.163 million.

Moving next to construction that’s just gotten started, this figure was up 1.2% in November to 1.547 million. On the single-family side, starts were up 0.4% to 1.181 million.

Moving finally to permits for future construction, these were up 6.2% to 1.639 million. Moreover, this is 8.5% above where they were last year. For the important single-family side, permits are up 1.3% at 1.128 million.

Gross Domestic Product (GDP)

GDP was up 33.4% overall in the third quarter in quite a rebound from virus-related shutdowns in the second quarter. Consumer spending was up 41% in the final estimates.

However, if you really want to know how strong the housing market was in the third quarter, this might blow your mind. After falling 35.6% in the second quarter, third quarter estimates of residential investment showed that investments were up 63%.

There was lots of pent-up demand after stay-at-home orders were lifted in many parts of the country and it really shows here.

Existing Home Sales

At an annual rate of 6.69 million, existing home sales were down 2.5% from October, but up 25.8% from last November. Meanwhile, the median price of an existing home was $310,800, up 14.6% as compared to last year.

The market continues to be tight. At a national level, the typical home is selling in just 21 days from the time it’s put on market. There are only 2.3 months’ worth of existing homes available on the market at the current pace of sales.

Moving to regional data, sales in the Northeast were down 2.2% at 880,000 annually, which is up 25.7% from last year. The median price of an existing home was up 17.4% at $354,100 as compared to last year at the same time.

Meanwhile, in the Midwest, the annual rate of sales was 1.59 million, down 2.5% but up 24.2% compared to last year. The median price of a new home was $239,100, up 14.6% for the year.

In the South, sales were down 3.8% to 2.82 million, which is 25.9% higher than last year at the same time. Prices were up 15% at $270,000.

Finally, sales in the West were up 27.3% on the year 201.4 million after holding steady for the month. The average home price was up 13.8% for the year at $467,600.

FHFA House Price Index

Overall, house prices were up 1.5% in October and have gone up 10.2% since last October. There was wide variation in regions from a gain of 0.9% in the West South-Central and East South-Central regions to a gain of 2.1% in New England. Yearly gains were anywhere between 8.4% – 12.5%.

New Home Sales

There was an 11% decrease in the pace of new home sales to an annual rate of 841,000. However, this is 20.8% above what the numbers were in November 2019. Meanwhile, there were 286,000 new houses for sale and 4.1 months’ worth of supply on the market. The median price of a home was $335,300 as compared to $328,000 in November of last year.

Case-Shiller House Price Index

The average price of a home across the 20 cities measured was up 1.6% on a seasonally adjusted basis in October. When removing that adjustment, prices were up 1.3% and have gone up 7.9% on the year. These numbers represent a rolling 3-month average.

Pending Home Sales Index

Pending home sales were down 2.6% and they’ve settled at an index level of 125.7 in November. The number of homes under contract for sale is a leading indicator for existing home sales in the upcoming month.

Mortgage Rates

The average rate for a 30-year fixed mortgage with 0.7 points paid in fees was down a couple of basis points to 2.65%, assuming a 20% down payment. That represents a new record low and has dropped from 3.64% last year at the same time.

Meanwhile, the average rate on a shorter-term 15-year fixed mortgage with 0.6 points paid and the same down payment was down a single basis point to 2.16% and dropped from 3.07% last year.

Now that you have the knowledge, go share with your clients. For even more tips, tricks and resources, check out Rocket ProSM Insight.

1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2021 Econoday, Inc. All rights reserved.

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    Kevin Graham

    Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage he freelanced for various newspapers in the Metro Detroit area.