Rates Rise, Breaking Five-Week Downward Streak

Mortgage rates jumped last week, breaking a five-week streak of declines.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.39%, up from 6.27% the week prior.

A year ago at this time, the 30-year FRM averaged 5.11%.

The 15-year fixed-rate mortgage also rose, up to 5.76% from 5.54%. A year ago, it averaged 4.38%.

“For the first time in over a month, mortgage rates moved up due to shifting market expectations,” said Sam Khater, Freddie Mac’s Chief Economist.“Home prices have stabilized somewhat, but with supply tight and rates stuck above six percent, affordable housing continues to be a serious issue for many potential homebuyers. Unless rates drop into the mid five percent range, demand will only modestly recover.”

Rates have a huge impact on what buyers can afford.

The typical U.S. homebuyer’s monthly housing payment hit $2,538, a record high, due to increased rates.

Home prices are beginning to moderate, falling YOY in March, but remain elevated. In more affordable regions like the South and Midwest, prices are still rising and competition is fierce, especially for starter homes.

Homebuilders have been conservative in how much they’ll build as demand has fallen. For the share of new homes to keep pace with 2019 levels, builders would have to increase housing starts by 20%.

This is especially true for small, inexpensive homes that could be reasonably sold for cheap. Increasing land and material prices – combined with picky community rules requiring things like two-car garages or homes of a certain size – have made it impossible to build a small, bare-bones house that could sell for $200,000 or less.

“It’s not that I don’t want to build entry-level homes,” Jerry Konter, the chairman of the National Association of Home Builders, told the New York Times. “It’s that I can’t produce one that I can make a profit on and sell to that potential purchaser.”

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