Homebuyers have caught a slight break from the recent uptick in mortgage rates, with the average for a 30-year mortgage falling last week for the first time in almost two months.
After seven straight weeks of increases, the average rate for a 30-year fixed mortgage ticked down to 3.33% last week, from 3.36% the week before, according to data released by the Mortgage Bankers Association (MBA) Wednesday. The record low was 2.85% in December.
While mortgage rates are still low by historical standards, home prices have been surging and there’s a severe shortage of homes for sale, creating a squeeze on homebuyers. The rise from record lows this winter has also made refinancing less appealing. An MBA index of applications for purchases, a leading indicator of sales, fell 1.5% last week, the first decline in five weeks, showing the effects of mounting affordability pressures, the MBA said. An index of refinancing applications fell 2.5% in the fourth straight week of declines.
“Many prospective homebuyers this spring are feeling the effects of higher rates and rapidly accelerating home prices. Record-low inventory is pushing home-price growth at double the rate from a year ago, and even above the 10 percent growth rates seen in 2005,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a statement. “The housing market is in desperate need of more inventory to cool price growth and preserve affordability.”
In yet another sign that affordability is crimping the pandemic housing boom, an index of pending home sales (a measure of contract signings) dropped 10.6% in February, the largest month-over-month decline since the early days of the pandemic, the National Association of Realtors said Wednesday.