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Mortgage rates have risen again this week, making home purchases even more expensive at the start of such an important spring market.
With rising house prices, any increase in rates puts more potential buyers out of business, and yet somehow the real estate market is more competitive than ever.
The average 30-year fixed-rate mortgage reached its last low of 2.75% at the end of January and has risen fairly steadily since then, according to the Mortgage News Daily. After a considerable movement overnight, it now amounts to 3.45%.
“Since the beginning of February, the total damage is almost 3/4% of the percentage, making it one of the biggest moves in the last 6 weeks,” said Matthew Graham, chief operating officer of Mortgage News Daily.
“The shopping market is always subject to these storms, and the extremely tight supply situation, combined with the still unpleasant demand in many metropolitan areas, can keep the real estate market surprisingly dynamic. The bigger question is when rising rates will eventually impact prices “
The rate is the same now as it was a year ago. However, the difference from a year ago is that house prices are rising.
Prices are now up more than 10% from now until 2020, according to CoreLogic, and there does not appear to be a reduction in earnings. This is due to the record supply of homes for sale.
Home builders are not stepping up as much as expected, as they face higher costs for land, labor and materials. They also continue to experience delays in transporting materials to job sites, thanks to Covid. The start of single-family homes has come much lower than expected in February, and the number of unbuilt houses is on the rise.
“There have been 36% gains in the last 12 months of single-family homes allowed, but they haven’t started because some projects have been disrupted due to costs and material availability,” said Robert Dietz, chief economist at the National Builders Association. of Houses. “Construction of single-family homes is expected to expand in 2021, but at a slower rate, as housing accessibility is caused by higher mortgage rates and rising construction costs.”
New homes already have a premium price compared to existing homes, so rates are especially important for that market.
For a new home with an estimated average price of $ 346,757 in 2021 and the recent 30-year mortgage rate of 3%, a quarter-percent increase in the interest rate would drop by about 1.3 million households, according to a new calculation by NAHB.
The decline in the supply of existing homes is only exacerbated by higher mortgage rates. Selling homeowners should probably buy their next home at a higher interest rate, so it’s a significant deterrent to moving.
The number of newly listed homes for sale for the week ended March 13 was 24% lower than last year, according to realtor.com. The total number of houses for sale is now half of what it was a year ago.
Although this situation makes it more difficult for buyers, it also shows that buyer demand has not fallen much, even in today’s higher rates. If buyers gave up, the offer would increase.
In fact, buyers are “flooding the real estate market earlier this year, eager to find a home,” according to Danielle Hale, chief economist at realtor.com. On average, homes sell seven days faster than last year.
Housing demand was high last year. The pandemic has created an emotional need to nest, not to mention a practical need for more space, given the work environment and home school. Even as vaccinations increase and more people return to offices and schools, homebuyers are not only in place, they are increasingly competitive.
Just over a third of homes sold in February exceeded the original asking price. This is the highest share recorded, according to Redfin, a real estate brokerage.
“This is the strongest sellers’ market since at least 2006,” said Daryl Fairweather, Redfin’s chief economist. “Buyers exceed the number of sellers by such a large margin that many homeowners stay put because they know how difficult it would be to find a place to move.”