“With improved employment and income prospects, millennials are an expanding portion of housing demand, as they move out of their parents’ homes,” David Berson, chief economist at Nationwide, told ABC News.
However, market observers are worried that a pick up in yields could deter first-time buyers. Yields on benchmark 10-year Treasury notes rose to 2.28% Thursday while the 30-year mortgage rate touched 3.94%, its highest in 10 months. The 30-year mortgage rate averaged 3.57% last week.
“Homebuilding is in a steady recovery,” Richard Moody, chief economist at Regions Financial Corp., told Bloomberg. “The fundamentals for demand are in good shape” although “higher mortgage rates could be a potential headwind if we see further gains in rates.”
Mortgage rates may continue to rise as investors anticipate a faster economic expansion and inflation from President-elect Donald Trump’s policies.
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