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Mortgage rates dropped this week, following the trend of the 10-year Treasury yield. Freddie Mac reported today that the average rate on the 30-year fixed rate home loan fell to 3.13% from 3.18% the previous week.
In the meantime, the job market is gaining momentum, adding nearly 1 million jobs in March. In fact, that was the fastest acceleration since August last year. As more people reenter the work place, the demand for housing is expected to increase as Americans set their sights on homeownership and mortgage rates remain historically low. As a result, with housing supply at record lows, we need to add more homes in the market. Housing starts may have cooled off in February but it seems that this was mostly due to weather effects. Expect construction to wrap up in the following months. Meanwhile, 11.7 million single-family homes are occupied by renters which implies that 15% of single-family homes are owned by investors. However, investors are hesitant to sell their property due to the capital gains tax. By reducing the capital gains tax, investors would be more motivated to sell their properties, thus increasing housing supply.
