Mortgage rates inched up to a two-month high last week, putting pressure on hopeful spring homebuyers.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.94%, up from the week prior’s 6.90%. A year ago at this time, the 30-year FRM averaged 6.65%. This is the fourth consecutive week of increases.
The 15-year fixed fell, however, to 6.26% from 6.29%. A year ago, it averaged 5.89%.
“The recent boomerang in rates has dampened already tentative homebuyer momentum as we approach the spring, a historically busy season for homebuying,” said Sam Khater, Freddie Mac’s Chief Economist.
“While sales of newly built homes are trending in a positive direction, higher rates and elevated prices continue to pose affordability challenges that may leave potential homebuyers on the sidelines.”
But even new home sales are coming up short of expectations despite faring better than existing homes. They increased month-over-month in January to a seasonally adjusted annual rate of 661,000, but experts had predicted 684,000.
Builders say labor shortages, lack of buildable land, and high costs– both for supplies and staying compliant with regulations, which the National Association of Home Builders says accounts for 24% of a home’s final price tag– keep new construction unaffordable for many Americans.
This is despite the incentives offered by builders, including mortgage rate buydowns, which are popular among buyers and companies.
Existing home listings are rising as sellers give up the wait for a more lucrative moment. However, buyers are hesitant despite their increased options thanks to the cost of purchasing a new house.
The typical monthly mortgage payment is now $2,671, just a few dollars short of October 2023’s all-time high.
As a result, pending home sales fell off in January, setting the stage for a rough spring buying season.