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Mortgage rates rose again this week, making home buying even more expensive at the start of the all-important spring market.
With rising house prices, any increase in rates causes more potential buyers to go out of business, but somehow the real estate market is more competitive than ever.
The average 30-year fixed-rate mortgage reached its last low of 2.75% in late January and has risen fairly steadily since then, according to Mortgage News Daily. After a considerable movement overnight, it now stands at 3.45%.
“Since early February, the total damage is nearly three-quarters of the percentage, making it one of the most important 6-week moves ever,” said Matthew Graham, chief operating officer of Mortgage News Daily.
“The shopping market is always facing these storms, and the ultra – tight supply situation, along with still – so – so – so demand, in many subway areas, can keep the real estate market surprisingly boil. The biggest question is when the Rising rates will ultimately affect prices. “
The rate is the same now as it was a year ago. The difference from a year ago, however, is that house prices are rising.
Now, according to CoreLogic, prices have risen more than 10% over this 2020 period and there seems to be no decrease in earnings. This is due to the low historical supply of homes for sale.
Home builders are not up as much as expected as they face higher costs of land, labor and materials. They also continue to experience delays in getting materials to workplaces, due to Covid. Single-family housing initiatives became much lower than planned in February, and the backlog of unbuilt homes is increasing.
“There has been a 36% gain in the last 12 months of single-family homes allowed but not started, as some projects have been halted due to cost and availability of materials,” said Robert Dietz, chief economist of the National Association of Home Builders. “Construction of single-family homes is expected to expand in 2021, but at a slower pace, as home affordability is challenged by higher mortgage rates and rising construction costs.”
New homes are already priced higher than existing homes, so rates are particularly important for this market.
For a new home with an estimated average 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 cost approximately $ 1.3 million of households, according to a new calculation. by the NAHB.
The reduction in the supply of existing homes is only aggravated by higher mortgage rates. Selling homeowners should probably buy the next home at a higher interest rate, so this is a major deterrent to relocation.
According to realtor.com, the number of homes for sale recently listed for the week ending March 13 was 24% lower than a year ago. The total number of homes for sale is now half of what it was a year ago.
While this situation makes it more difficult for buyers, it also shows that demand from buyers has not decreased much, even in the current environment of higher rates. If buyers had withdrawn, supply would increase.
In fact, buyers are “flooding the real estate market earlier this year, eager to find a home of their own,” according to Danielle Hale, chief economist at realtor.com. On average, homes sell seven days faster than last year.
Demand for housing soared last year. The pandemic created an emotional need to nest, not to mention a practical need for more space, given the work and school environment. Although vaccines are on the rise and more people are returning to offices and schools, homebuyers are still not only in place, but are increasingly competitive.
Just over a third of homes sold in February exceeded the original sale price. This is the largest share recorded, according to Redfin, a real estate broker.
“This is the best-selling market since 2006, at least,” said Daryl Fairweather, chief economist at Redfin. “Buyers outnumber sellers by such a huge margin that many homeowners are stuck because they know how difficult it would be to find a place to move.”