Published by REALTOR.com | March 4, 2021
It looks like the era of cheap loans may be coming to an end.
For the better part of a year, one bright spot for home buyers in this hypercompetitive market of record-high prices and a record-low number of homes for sale has been mortgage interest rates, which dropped to unheard-of lows. Now it looks like the era of cheap loans may be coming to an end.
Mortgages rates crossed the 3% threshold for the first time since July 2020, according to Freddie Mac. They rose to an average 3.02% on 30-year fixed-rate loans in the week ending March 4.
“The era of mortgage rates under 3% is likely behind us. For first-time buyers, the market is looking a lot more challenging. The current trajectory of interest rates is putting a damper on their budgets and making it more expensive to afford a home.”
–Realtor.com Senior Economist George Ratiu
Almost 20% of first-time buyers spent more than a year shopping for a home due to the high prices and lack of inventory as the coronavirus pandemic and low mortgage rates pushed more would-be buyers into the market, according to a recent Realtor.com survey.
As a result of the low rates and the pandemic, the number of homes for sale plummeted 49% compared with February of last year. That’s particularly bad as the nation was already in the throes of a severe housing shortage a year ago. The coronavirus pushed more buyers into the market as folks fled the cities for the suburbs and cooped-up families sought larger, more spacious homes. Record-low mortgage rates also served as a powerful incentive.
The low supply of homes for sale, coupled with high demand, has resulted in median home list prices rising 14% in February compared with the previous year, according to Realtor.com.