Mortgage rates continued to rise!

WASHINGTON–Mortgage rates continued to rise

last week just as the spring buying season is approaching, but even though home prices have also been skyrocketing, the two trends are not expected to put much of a dent in a hot market.

The rising rates and prices, however, are expected to delay many potential buyers looking to purchase their first home.

After the average rate on the 30-year fixed mortgage hit a low of 2.75% at the end of January, it had risen to 3.45% as of last week, according to the Mortgage Bankers Association.

The average rate on the 30-year mortgage now stands at the same point at which it stood one year ago.  The same can’t be said for home prices, which are now up over 10% from this time in 2020, according to CoreLogic. Prices are expected to remain high due to the record low supply of homes for sale, noted MSNBC in its analysis.

MSNBC noted Homebuilders are not stepping up as much as hoped, because they are facing higher costs for land, labor and materials. They also continue to experience delays in getting materials to job sites, due to COVID-19.  Single-family housing starts came in much lower than expected in February, and the backlog of unbuilt homes is rising.

Permits Granted, But Projects Halted

"There has been a 36% gain over the last 12 month of single-family homes permitted but not started as some projects have paused due to cost and availability of materials," Robert Dietz, chief economist of the National Association of Home Builders, told MSNBC. "Single-family home building is forecasted to expand in 2021, but at a slower rate as housing affordability is challenged by higher mortgage rates and rising construction costs."

For a new home with an estimated median price of $346,757 in 2021 and the recent 30-year fixed-rate mortgage rate of 3%, a quarter percentage point increase in the interest rate would price out approximately 1.3 million households, according to a new calculation by the NAHB.

“The supply crunch of existing homes is only exacerbated by higher mortgage rates. Homeowners who sell would likely have to buy their next home at a higher interest rate, so that's a significant deterrent to moving,” observed MSNBC.

The number of newly listed homes for sale for the week ended March 13 was 24% lower year over year, according to realtor.com. The total number of homes for sale is now half of what it was a year ago, the report added.

Buyers Not Backing Off

The data show buyers are not backing off.

Buyers are in fact, "flooding the housing market early this year, eager to find a home of their own," according to Danielle Hale, realtor.com's chief economist. On average, homes are selling seven days faster than last year, MSNBC reported.

"This is the strongest seller's market since at least 2006," added Daryl Fairweather, Redfin's chief economist. "Buyers outnumber sellers by such a huge margin that many homeowners are staying put because they know how hard it would be to find a place to move to."