Mortgage Resources

Search with GoPrime Mortgage

Check out our guides, tools and research for expert help on all your home mortgage and marketing questions!

More Stellar Housing Numbers. How Long Can They Last?

January 22, 2021
Milestones in the mortgage process - bozeman montana local lender

While it wasn’t quite the biggest surprise of 2020, the strength of the housing market was one of the best. The just-released numbers for December keep the good times rolling.

Leading the charge was December’s Existing Home Sales report from the National Association of Realtors (NAR).  The annual pace wasn’t quite at the recent 15-year high seen 2 months ago, but it hasn’t really fallen since then.  No complaints.

20210122 NL2.png

If you want to see more 15-year records broken, you’ll have to rely on The Census Bureau’s New Residential Construction numbers.  While not a direct measure of New Home Sales, the correlation is high (we’ll get the official sales numbers next Thursday).  For now, we can bask in the warm glow of another long-term high in Housing Starts.

20210122 NL6.png

With sales and construction numbers like this, it’s no surprise to see builder confidence remain in record high territory.  The National Association of Homebuilders (NAHB) reported another slight drop in builder confidence for January. The silver lining?  If not for the past 3 months, January’s index would have been an all-time high.

20210122 NL3.png

Silver linings aside, do builders know something that the home sales data has yet to tell us?  That’s possible, but most of the drop was chalked up to higher costs for materials, and shortages of labor and lots.  In other words, the only thing the builder confidence numbers are telling us is that the housing market is a victim of its own success.

If we want to worry about the future of housing for more legitimate reasons, the most obvious candidate is the threat of rising rates.

Actually, there have been indications of upward pressure on interest rates for months.  That hasn’t been immediately apparent in the mortgage world because mortgage rates diverged from their normal benchmarks in such an unprecedented way in 2020.

Chief among those benchmarks is the 10yr Treasury yield, which has been conveying a slow, steady rise in rates since August.  Mortgage rates, however, moved mostly lower since then, largely because they still had a lot of catching up to do following 2020’s initial bond market shock.

20210122 NL1.png

Now that mortgage rates have been reunited with Treasuries, so to speak, we can expect to see bond market volatility have an easier time translating to movement in the mortgage market.  From there, to whatever extent we credit low rates for benefitting the housing market, there is indeed some cause for concern.

Are we talking about huge, immediate concerns?  Probably not.  The trajectory of rates depends heavily on the trajectory of the pandemic and its economic impacts.  It goes without saying that covid won’t be defeated overnight.  Moreover, progress may be uneven (2 steps forward, 1.X steps back?).  As such, even if rates continue trending higher, they would be hard-pressed to do so very quickly.

The week of the Georgia senate election was an exception, and rates have already recovered significantly since then. As of this week, the average lender was almost all the way back in line with early January levels.

20210122 nl7.png

The week ahead brings more housing data with home price reports on Tuesday, New Home Sales on Thursday, and Pending Sales on Friday (a leading indicator for next month’s Existing Home Sales report).  In addition the Fed releases a policy statement on Wednesday.  Given what we’ve heard from Fed Chair Powell recently, it’s too early for investors to be looking for any major changes from the Fed, but hints about those changes will eventually be a big motivation for upward pressure in rates.

Related News & Articles

Benefits of Becoming a Homeowner

Benefits of Becoming a Homeowner

Given the fluctuating (and current!) housing market, it’s sometimes easy to wonder “Is it worth it to buy a house?” The steps to becoming a homeowner may seem daunting, and we get that. The positives of owning a home often far outweigh the negatives that many may...

What You Should Know When You Are Ready to Buy a Home

What You Should Know When You Are Ready to Buy a Home

Getting Ready to Buy Getting ready to buy a home can feel like a daunting task.  The gravity of the decision can be enough in itself, but along with that comes all the little competing voices telling you how you should go about the process.  Things you’ve heard from...

Your Guide to Buying a Home in Bozeman

Your Guide to Buying a Home in Bozeman

How to Choose the Right Mortgage Lender Are you considering buying a home in the picturesque city of Bozeman, Montana? Congratulations! Bozeman offers a unique blend of outdoor adventure, cultural attractions, and a thriving community, making it a desirable place to...