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Mortgage rates rose again this week, making home buying even more expensive at the start of the main spring market.
While house prices are soaring, the rise in rates is pushing even more potential buyers out of the way, and yet the housing market is somehow more competitive than ever before.
The average interest rate on the fixed-rate loan for thirty years reached its final low of 2.75% at the end of January and has risen quite a bit since then, according to Mortgage News Daily. After a significant shift overnight, it now stands at 3.45%.
“Since the beginning of February, the total damage is nearly 3 / 4th of a percent, making it one of the biggest moves in any six weeks ever,” said Matthew Graham, chief operating officer at Mortgage News Daily.
“The buying market is always weathering these storms, and the ultra-tight supply situation coupled with an ever-eager demand in many metro areas could keep the housing market surprisingly alive. The bigger question is when rising prices will ultimately have an impact on prices.”
The rate is now the same as a year ago. The difference from a year ago, however, is that house prices are soaring.
According to CoreLogic, prices are now rising by more than 10% from this time in 2020, and there seems to be no disappointment in profits. This is due to the record low supply homes for sale.
Homebuilders do not do as much as they hope to because they face higher costs for land, labor and materials. They also continue to experience delays in getting materials to workplaces, due to Covid. The start of single-family housing came in February much lower than expected, and the backlog of unbuilt houses is increasing.
“There has been a 36% increase allowed but not started during the last twelve months, as some projects have been halted due to the cost and availability of materials,” said Robert Dietz, chief economist at the National Association of Home Builders. “The single-family building is expected to expand in 2021, but at a slower pace, as housing affordability is being challenged by higher mortgage rates and rising construction costs.”
New homes already have a price premium on existing homes, which is why rates are especially important for that market.
For a new home with an estimated average price of $ 346,757 in 2021 and the recent thirty years fixed interest rate of 3%, the interest rate with a quarter percentage point will cost about 1.3 million households, according to a new calculation by the NAHB.
The provision of existing homes is only exacerbated by higher mortgage rates. Homeowners who sell will probably have to buy their next home at a higher interest rate, so this is a major deterrent to relocation.
According to realtor.com, the number of newly listed homes for sale for the week ended March 13 was 24% lower than year. The total number of homes 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 the demand from buyers has not decreased much, not even in the current higher price environment. If buyers fell back, supply would rise.
Buyers “flooded the housing market early this year and are eager to find their own home,” according to Danielle Hale, chief economist at Realtor.com. Homes are selling on average seven days faster than last year.
The demand for housing was highlighted last year. The pandemic has created an emotional need to nest, not to mention a practical need for more space, given the work-and-school-from-home environment. Even as vaccinations increase and more people return to offices and schools, homebuyers are still not only in power but also increasingly competitive.
Just over a third of homes sold in February asked for more than their original price. According to Redfin, a real estate agent, this is the largest stock.
“It’s the strongest selling market since at least 2006,” said Daryl Fairweather, Redfin’s chief economist. “Buyers surpass sellers by such a large margin that many homeowners stay because they know how difficult it is to find a place to move to.”