Mortgage rates increased again this week as the market heads into the busy spring season, but it doesn’t appear to be scaring many buyers away, CNBC says. At the end of January, the average rate on a 30-year fixed mortgage hit a low of 2.75%—it now rests at 3.45%, the same rate as in March 2020. A sizable increase such as this surely prices many buyers out of the market, but it's predicted low housing supply and high demand are here to stay, according to CNBC. What remains questionable is how home prices will react in response. Though the rate is the same now as one year ago, average home prices are in different positions.
Prices are now up over 10% from this time in 2020, according to CoreLogic, and there appears to be no letup in the gains. This is due to the record low supply of homes for sale.
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. Single-family housing starts came in much lower than expected in February, and the backlog of unbuilt homes is rising.
“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,” said Robert Dietz, chief economist of the National Association of Home Builders. “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.”