Mortgage rates were virtually unchanged this week, but signs indicate that the housing market is constrained by higher prices and low inventory.
Mortgage buyer Freddie Mac reported Thursday that the benchmark 30-year loan rate was 3.18% this week, up from 3.17% last week. A year ago, the rate was 3.33%.
The 15-year loan, popular among those who refinance their mortgages, was unchanged from last week at 2.45%. A year ago it was 2.82%.
“Although mortgage rates remain low, we are beginning to see a pullback by those looking to enter the housing market,” said Sam Khater, Freddie Mac’s chief economist. “In fact, homebuyer demand has gone from 25% above pre-COVID levels at the start of the year, when mortgage rates hit record lows, to 8% above pre-COVID levels today.”
While mortgage rates remain historically low, strong demand for homes has led to low inventory and higher prices.
Wednesday, the National Association of Realtors’ index of pending home sales tumbled 10.6% to 110.3 in February, its lowest level since May of last year. Combined with a 2.4% dip in January, contract signings are now 0.5% behind where they were last year after eight straight months of year-over-year gains.
In January, U.S. home prices increased at the fastest pace in seven years, according to the S&P CoreLogic Case-Shiller 20-city home price index. The pandemic has fueled demand for single-family houses even as the supply for such homes shrinks.
Economists have expected modest increases in home-loan rates this year, though they likely will remain low while the Federal Reserve keeps interest rates near zero until the economy recovers from the coronavirus pandemic.