In January, mortgage rates rose for the first time in a couple of months, which was likely because of the rising of long-term bond yields. The average interest rates for a 30-year fixed mortgage loan climbed up by 14 points to 2.79%—the highest the rate has been since November of last year.
The 10-year Treasury yields typically move in unison with mortgage rates, and they have been rising steadily since early January. Those yields rose to 1.18%, which is the highest they’ve been since February of 2020. Ultimately, they dropped back down to 1.10%. High rates and high yields were both expected for this year, and most experts agreed that the mortgage interest rates would end up around 3.1% to 3.3% by the end of the year.
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Mortgage interest rates may be rising, but they are still very low historically. At the same time, the number of homes going up for sale has sunk drastically since the end of last year. The construction of homes has been lagging behind the demand, likely because many homeowners are hesitant to try and sell their homes due to the global pandemic.
With the record low of homes for sale in December, real estate transactions overall fell also, which likely helped contribute to the already low supply. The number of homes for sale on the market in the U.S. fell below 700,000—an all-time low.
Home construction is expected to ramp up this year, which will hopefully help the choked market we are currently in, where there are many more buyers than homes for sale. Coupled with rising mortgage interest rates, it’s a challenging time for first-time homebuyers to get into the market.
The cities hit hardest in December last year were Nashville, Memphis, Charlotte, Atlanta, and Detroit, which all fell between 14 and 20%. On the other hand, San Jose, San Francisco, and Boston all saw a positive increase in homes for sale.
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