Red-hot housing market will face rising rates, falling confidence

U.S. 30-year fixed mortgage rates hit another record low this week, falling to 2.65%, data released Thursday by Freddie Mac showed, but Americans are starting to worry that the goldilocks environment for home sales could be coming to an end.

What's happening: The decline in mortgage rates to the lowest in the 50-year history of the data has helped keep costs down for prospective buyers even as overall prices have skyrocketed thanks to a flood of demand and declining supply.

• Nationally, housing inventory declined by 39.6% over the last year.

Pay attention: "[H]omebuyers can still take advantage of low rates to offset the steep rises in home prices that we’ve seen in most areas over the last year, but finding a home will continue to be challenging," Realtor.com chief economist Danielle Hale said in a statement.

• "In fact, in December, the median listing price was up 13.4% from a year ago while the number of homes for sale dipped below 700,000 for the first time."

The future outlook for mortgage rates is likely higher, Hale added, "thanks to a changing landscape in Washington."

• On Thursday, yields on the 10-year U.S. Treasury note rose above 1.1%, the highest since March, as traders priced in higher chances of another big fiscal spending package from Congress.

• The mortgage rate moves in line with 10-year yields as well as the rates set by mortgage servicers.

Watch this space: Fannie Mae's Home Purchase Sentiment Index dropped six points from November to December, as both buyers and sellers became far more pessimistic about making a deal.

• The index fell to its lowest since May, with confidence among those who said it was a "good time to buy" falling by 5 percentage points and among those who said it was a "good time to sell" dropping by 9 percentage points.