Falling Mortgage Rates Boost Housing – January 21, 2020

Mortgage rates have a big influence on housing. Last year, the 30-year fixed mortgage rate peaked in November, averaging 4.87%. Rising rates throughout much of 2018 slowed housing activity as we can see in the graphic below.

Thirteen months later, the 30-year rate averaged 3.72%, and we’ve seen a significant uptick in housing.

December’s 11.2% jump in single-family housing starts is a 12-year high. The big increase was likely influenced by mild weather in parts of the country; therefore, we could see a pullback in January. While it can be volatile on a monthly basis, the overall trend is favorable.

Though more stable, single-family building permits have also been on the upswing and have risen in seven of the last eight months.

In a press release last week, the National Association of Home Builders credits attractive mortgage rates, a healthy labor market, and a shortage of homes in parts of the nation for the upturn in building.

It noted that confidence among home builders remains at a high level, which is encouraging as we enter 2020.

It’s not that all the data have been flashing green. While job growth has been solid, job openings tumbled in November (U.S. BLS), which might be a signal the economy will remain on a modest growth track over the near term.

Yet, let’s not discount the renewed strength in housing, which is considered a leading economic indicator. It’s an encouraging sign as the new year begins.

Created 2020-01-21 15:45:41