Mortgage rates rose this week but remained below 3.00%. Specifically, the 30-year fixed mortgage rate ticked up to 2.99% from 2.95% the previous week. Expect mortgage rates to increase modestly in the following months as the economy continues to recover. NAR forecasts the 30-year fixed mortgage rate to average 3.20% in 2021.

These historically low mortgage rates fuel home buying activity amidst the pandemic and higher unemployment. While June is homeownership month, let's take a look at some facts about homeownership:

In 2019, 78.7 million people owned a home, with about 1 million new homeowners compared to the previous year. While most of these owners bought their home in 2007, these owners have already accumulated about $125,000 in equity due to price appreciation. Nevertheless, these owners may have saved even more if they refinanced their home as mortgage rates are nearly 3.5% lower compared to 2007.

According to the U.S. Census, 3 in 5 homeowners still have to make a mortgage payment every month. In the meantime, remember that a rate lower by 3.5% decreases the monthly payment by $400. Thus, homeownership is definitely the main source of wealth for millions of households.

Although mortgage rates are currently much lower than in 2007, recent and would-be homebuyers need to pay a higher amount for their home loan every month due to record-high home prices. Specifically, while the typical home is nearly 60% more expensive compared to 2007, the monthly mortgage payment for a 30-year fixed rate home loan increases to $1,290 from $1,230 back in 2007. Thus, current low mortgage rates may have dropped the borrowing cost significantly, but rising home prices erode affordability, pricing out some home buyers.

However, due to favorable demographics with nearly 5 million millennials reaching the age that they typically get married, expect activity to remain strong. NAR forecasts existing and new home sales to rise 10% and 20% in 2021, respectively.

Nadia Evangelou

Senior Economist and Director of Forecasting

Nadia Evangelou is Senior Economist and Director of Forecasting for the National Association of REALTORS®.

"Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission."