Riding the wave of a rise in inflation and stronger than anticipated consumer spending, mortgage rates jumped once again this week, as the 30-year fixed-rate mortgage (FRM) averaged 3.92% with an average 0.8 point for the week ending February 17, 2022, up from last week when the FRM averaged 3.69%. A year ago at this time, the 30-year FRM stood at 2.81%.
Freddie Mac’s weekly Primary Mortgage Market Survey (PMMS) also found the 15-year FRM averaging 3.15%, with an average 0.8 point, up from last week when it averaged 2.93%. A year ago at this time, the 15-year FRM averaged 2.21%.
“Mortgage rates jumped again due to high inflation and stronger than expected consumer spending,” said Sam Khater, Freddie Mac’s Chief Economist. “The 30-year fixed-rate mortgage is nearing 4%, reaching highs we have not seen since May 2019. As rates and house prices rise, affordability has become a substantial hurdle for potential homebuyers, especially as inflation threatens to place a strain on consumer budgets.”
As that strain continues, the National Association of Realtors (NAR) found that, out of 183 markets analyzed, 67% of the metros reached double-digit price appreciation in Q4, compared to 78% in Q3. Nationally, NAR also found that the median single-family existing-home price rose at a slower rate of 14.6% year-over-year to $361,700, compared to the 15.9% year-over-year pace last quarter.
Tight inventory continues to escalate prices, as this week, the U.S. Census Bureau and U.S. Department of Housing & Urban Development (HUD) jointly announced that privately‐owned housing starts in January 2022 were at a seasonally adjusted annual rate of 1,638,000, 4.1% below the revised December estimate of 1,708,000, but 0.8% above the January 2021 rate of 1,625,000.
“Today’s new residential construction report from the Census Bureau pointed toward new home construction’s resiliency thus far in light of rising mortgage rates,” said Doug Duncan, Chief Economist at Fannie Mae. “New single-family housing permits rose 6.8% over the month to an annualized pace of 1.21 million, the fastest over the past year. January data likely does not reflect the full impact of recent mortgage rate increases. However, consistent with ongoing strong homebuilder sentiment survey readings, we see this initial strength in construction permits as a sign that demand for new homes remains strong given the lack of existing inventory available for sale.
Conversely, despite an economic uptick, unemployment numbers were on the rise, as for the week ending February 12, the U.S. Department of Labor (DOL) reported the advanced figure for seasonally adjusted initial unemployment claims was 248,000, an increase of 23,000 from the previous week's revised level.