Although mortgage rates continued to rise this week, expect rates to remain low near 3.3% in 2021. Freddie Mac reported today that the average rate on the 30-year fixed rate home loan ticked up to 3.17%, the highest level since June. However, rates are still lower than a year earlier when the pandemic hit the country. The Fed reassured that it will keep rates low for years to come, giving the opportunity to more would-be home buyers and owners to benefit from low mortgage rates.
The National Association of REALTORS® recently released the Home Buyers and Sellers Generational Trends Report. According to the report, millennial buyers (22 to 40 years) continue to make up the largest share of home buyers at 37%. In fact, millennials have been the largest share of buyers since 2014. Meanwhile, millennials are also the age group that tend to move the most compared to other age groups. While people move for various reasons, 40% of the millennial movers relocate for housing-related reasons such as buying a home instead of renting, or a move to a newer/bigger/less expensive house. With home prices reaching record highs in many areas due to limited inventory, millennials opt to move to more affordable areas where they can find a home to purchase and benefit from the low mortgage rates.
As a result, areas with relatively more housing inventory can be more attractive to millennial home buyers. For instance, although housing inventory is continuously declining across the country, active listings in Midland, TX rose by 42% in February compared to a year earlier. In the meantime, more than 50% of the homebuyers are millennials in the area due to better affordability conditions. Since housing is more affordable in the area, this additional inventory may increase home buying activity, boosting the local economy. With historically low mortgage rates and favorable demographics, local authorities should try to find solutions to build more homes, which would ease housing price growth and bring more buyers in their area. NAR has developed resources that work uniquely in each community to address the specific issues related to housing affordability and supply. Find valuable information and tools here to start the dialogue in your community.