Mortgage rates jumped to the highest level in more than six months as investors and the Federal Reserve grow more optimistic about the economy.
The 30- and 15-year fixed-rate mortgages averaged 3.17% and 2.45%, respectively, for the week ending March 25, according to a Freddie Mac report. The 30-year rate increased eight basis points from the previous week while the 15-year rate rose 5 basis points, reported Realtor.com.
The increases equate a half a percentage point rise to date in 2021, eclipsing 3% for the first time and putting the 30-year mortgage rate at its highest level since last summer
“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.
But nationwide, home buyers are not deterred. Mortgage applications for home purchase loans have increased for four consecutive weeks, according to Realtor.com’s reporting on data from the Mortgage Bankers Association.
Experts suggest that home buying is still being spurred by families seeking more space to accommodate working and schooling from home. And millennials are now in peak home-buying years, driving a rise in the first-time home buyers category.
But low inventory is an ongoing challenge as demand continues to far outpace supply. The pandemic continues to influence the housing market with many sellers not listing their homes for sale amid the coronavirus pandemic.
This is especially evident in Boulder County where housing inventory has been lagging demand for years. Inventory hit an all-time low last year in part because of the ‘stay put’ mentality prevalent in the pandemic, and in part because of the lack of homes for home sellers to buy.
Nationwide the supply of new homes for sale is low because of the years of low home building activity that followed the Great Recession, which “led to a supply-demand imbalance in the housing market,” writes 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.
But rates may not continue to rise in the near future – another effect of the pandemic and good news as the spring home-buying season marches in.
“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.
Read the full story at: realtor.com/news/real-estate-news/mortgage-rates-soar-to-highest-level-since-june-2020-so-why-is-the-housing-market-still-hot.
By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in commercial and residential real estate. For questions, e-mail Tom at [email protected], call 303.441.5620 or visit boulderco.com.