The average mortgage rate for a 30-year fixed loan fell four basis points last week to 2.73%, according to Freddie Mac’s Primary Mortgage Market Survey. This is the second week mortgage rates have ticked downwards since Jan. 14’s sudden jump.
The 15-year fixed mortgage rate also shifted downward to 2.2 from 2.21 the week prior.
With last week’s data now in, mortgage rates have hovered below 3% for six months, and housing affordability is feeling the strain. Home prices in November rose 9.5% nationally over the same time last year, according to the S&P CoreLogic Case-Shiller index.
November home price numbers were buoyed by record-low mortgage rates, said Matthew Speakman, economist at Zillow. With ultra-low rates in place, a wave of eager would-be homebuyers flooded the market, further stoking the already-intense competition for homes.
Sam Khater, Freddie Mac’s chief economist, is concerned about rising home prices.
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“Even as house prices increase at the fastest rate we’ve seen in years, competition to buy is strong given the low inventory that exists across the country. The fact that there are not enough homes to meet demand is going to be an ongoing issue for the foreseeable future,” Khater said.
While construction plays catch-up, the Fed showed no indication of increasing interest rates after the Federal Open Market Committee left future economic policies virtually unchanged at its Wednesday meeting, indicating that short-term mortgage rates will stay low for years to come.
Despite record low mortgage rates putting upwards pressure on home prices, Federal Reserve Chairman Jerome Powell said it is a “passing phenomenon.”
“There was a lot of pent-up demand. It’s a one-time thing happening with people who are spending all of their time in their house and thinking, ‘I need a bigger house or I need another house.’ But this is a one-time shift in demand that we think will get satisfied, and supply will be called forward so price increases are unlikely to be sustained,” Powell said.
