Thirty-year mortgage rates rose to 6.288% this week, an increase from 6.196% the previous week, according to U.S. News data. Mortgage rates have generally been dropping since the start of the year, but the recent conflict in Iran has pushed rates upward.
For the week ending March 6, mortgage applications rose 3.2% from the previous week, according to the Mortgage Bankers Association.
“Borrowers in recent weeks were able to get 30-year conforming rates below 6%, but with the current volatility, longer-term rates have moved up,” said Mike Fratantoni, MBA’s senior vice president and chief economist, in a statement.
Home Prices Continue to Rise, but Affordability Is Improving
In February, the median existing home sale price rose 0.3% year over year to $398,000, according to the National Association of Realtors. That marks the 32nd consecutive month of annual home price increases.
At the same time, NAR’s Housing Affordability Index rose to 117.6 in February, up from 117.1 in January and 103.1 a year ago. Affordability improved in all regions and just reached its highest level since March 2022. Given that home prices have continued to rise, lower mortgage rates may be the driving factor of improved affordability.
“Housing affordability is improving, and consumers are responding,” said Lawrence Yun, NAR chief economist, in a release. “Still, there is a long way to go to return to prepandemic levels of transaction activity. There are more than 6 million more jobs than in 2019, yet home sales per year are down by 1 million.”
Interestingly, mortgage credit availability also increased in February, according to the MBA. A rise in mortgage credit availability suggests that lenders are loosening credit requirements, paving the way for more borrowers to qualify for home loans. However, the MBA confirmed that most of that increased credit availability applied to refinances.
“Most of last month’s supply growth was in loan programs that allowed for cash-out refinance and on investor homes,” said Joel Kan, MBA’s vice president and deputy chief economist, in a release.
[Read: Best Mortgage Refinance Lenders.]
Sluggish Real Estate Inventory Is Still a Problem
Lending to homebuyers’ struggle is the fact that housing inventory remains sluggish. In February, there was only a 3.8-month supply of homes for sale, unchanged from January, per the NAR. It typically takes a five- to six-month supply of homes to balance the housing market.
Although mortgage rates have been falling, they clearly haven’t dropped enough to push more property owners to sell. Many homeowners are sitting on low mortgage rates due to refinancing in the pandemic era when rates plunged. Until rates come down enough where existing homeowners are more motivated to sell, real estate inventory could remain stalled.
“Inventory is growing, but sluggishly,” Yun said. “If demand picks up notably in the coming months and outpaces supply growth, home prices will inevitably rise. That is why increasing supply is so important to help limit home price growth, improve housing affordability and boost transactions.”
More from U.S. News
How to Refinance a Rental Property
Is Mortgage Interest Tax Deductible?
Can You Get a Mortgage When You Owe the IRS?
Mortgage Rates Increase As Conflict Continues Overseas originally appeared on usnews.com
