Mortgage rates hit a new high this week, but the slow crawl to 7% has not dampened home building or the expectation that borrowing costs will fall this year, according to Freddie Mac.
The average 30-year fixed-rate mortgage was 6.82% for the week ending March 21, according to Freddie Mac’s latest Primary Mortgage Market Survey. That’s an increase from the previous week when it averaged 6.74%. A year ago, the 30-year fixed-rate mortgage averaged 6.42%.
The average rate for a 15-year mortgage was 6.21%, up from 6.16% last week and up from 5.68% last year.
Yesterday’s Federal Reserve meeting gave little insight into the timeline for interest rate cuts. The central bank said it would continue to monitor inflation and other economic indicators to determine when to lower rates. Market expectations are that the first rate cut will come in the summer, if not later in the year. That means homebuyers shouldn’t anticipate a meaningful drop in borrowing costs anytime soon.
Even with the expectation of higher rates for longer, the housing market has seen steady activity driven by buyers who, for one reason or another, must buy a home. The demand has been met by an increase of new home sales, according to Freddie Mac’s Chief Economist Sam Khater.
“After decreasing for a couple of weeks, mortgage rates are once again on the upswing,” Khater said. “As the spring homebuying season gets underway, existing home inventory has increased slightly, and new home construction has picked up.
“Despite elevated rates, homebuilders are displaying renewed confidence in the housing market, focusing on the fact that there is a good amount of pent-up demand, an ongoing supply shortage and expectations that the Federal Reserve will cut rates later in the year,” Khater continued.
If you are ready to shop for the best rate on a new mortgage, consider visiting an online marketplace like Credible to compare rates and get preapproved with multiple lenders at once.
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New home supply builds
New home construction is bouncing back just in time for the spring homebuying season. In February, housing starts climbed 5.9% year-over-year and home completions were 10.7% higher annually, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, signaling potentially more home options in coming months.
Overall, housing supply has improved, as the number of homes for sale increased by 14.8% compared to last year and grew for the fourth straight month, according to a report by Realtor.com. Moreover, homes for sale priced between $200,000 and $350,000 grew by 20.6% compared to last year, outpacing all other categories.
“Both progress in inflation and a boost in home supply would help the housing market return to more balance and affordability,” Realtor.com Senior Economic Research Analyst Hannah Jones said in a statement. “Inflation moving towards 2% would allow for easing mortgage rates, and more home supply would relieve upward price pressure. When these two levers start to move in the right direction, many buyers will see a more favorable housing market.”
If you’re looking to become a homeowner, you could still find the best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.
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New initiatives could drive demand
A new initiative recently launched by President Joe Biden to improve affordability and supply issues could help increase demand for housing in the current high-rate environment.
Biden has called on Congress to invest more than $175 billion in affordable housing initiatives, according to a White House statement.
In his State of the Union address earlier this month, Biden called on Congress to create legislation giving a $10,000 tax credit to first-time homebuyers and those who sell their starter homes. This move would help middle-class Americans cope with higher borrowing costs while incentivizing existing homeowners to sell more homes.
“We are looking to the government to support home buyers through a slate of incentives, namely through a proposed homebuyer tax credit,” Max Slyusarchuk, the CEO at A&D Mortgage said. “These are sure to stimulate sales somewhat but won’t miraculously turn the industry around. We need the Fed to meaningfully reduce rates for that to happen.”
If you’re looking for a competitive mortgage rate this spring homebuying season, visit Credible to compare rates and lenders and get a mortgage preapproval letter in minutes.
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