Mortgage rates have jumped to the highest point in over half a year as investors grow more optimistic about the state of the economy. And that’s bad news for some home buyers.
The 30-year fixed-rate mortgage averaged 3.17% for the week ending March 25, up eight basis points from the previous week, Freddie Mac reported Thursday. It’s the highest level the 30-year mortgage has reached since June of last year.
The 15-year fixed-rate mortgage, meanwhile, rose five basis points to an average of 2.45%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.84%, up 22 five points from the previous week.
So far in 2021, mortgage rates have risen over half a percentage point. Mortgage rates rose above the 3% for the first time since last summer earlier this month. Rising mortgage rates are a reflection of the upbeat sentiment among investors, which has pushed long-term bond yields higher, including the 10-year Treasury.
“Rising expectations around the boost to economic activity from a fresh round of fiscal stimulus, equal to more than one month’s worth of economic output, and reemerging consumers drove rates higher,” said Danielle Hale, chief economist at Realtor.com.
(Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
Higher mortgage rates have yet to dampen demand among home buyers. The volume of mortgage applications for loans used to purchase homes has increased for four consecutive weeks, according to data released Wednesday by the Mortgage Bankers Association.
Desperate for more space
As people continue to work from home, many families are in desperate need of more space, causing them to pursue buying larger homes. At the same time, millennials have reached their peak home-buying years. As more young couples move in together and get married, that’s increase homeownership demand.
But the number of homes for sale has not kept up with demand. Many sellers have opted against listing their homes for sale amid the coronavirus pandemic. Plus, years of under-building of new homes following the Great Recession has led to a supply-demand imbalance in the housing market.
Home builders are working feverishly to construct new homes, but rising material costs could become an issue. Overall, it’s a recipe for higher prices. Median listing prices were up 15.6% from a year ago as of Thursday, according to a new report from Realtor.com.
“As both home-price growth and mortgage rates continue this upward trend, we may see affordability challenges become more severe if new and existing supply does not significantly pick up,” Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association, said in the organization’s application report.
The spring home-buying season is here, which means more buyers streaming into the market and more competition for homes. But buyers might see some relief in coming weeks, at least when it comes to mortgage rates.
“Concerns about a possible new wave of COVID in Europe and what that might mean for cases in the U.S. could foreshadow a pause in rate increases — even if brief — in the weeks ahead,” Hale said.