Mortgage rates rose for the second week, ticking up to 3.64 percent as Fed VIPs hinted they might raise short-term borrowing costs sooner rather than later. A year ago, 30-year, fixed-rate mortgages averaged 3.87 percent, according to Freddie Mac.
Rates on long-term loans have held below 4 percent for 16 of the last 17 months, a boon to both buyers and sellers.
Last month, low rates combined with a steady job market helped lift a measure of home purchase contracts, which rose for the third month to a 10-year high. The surge was particularly strong in the West, where pending sales jumped more than 11 percent, the biggest advance since the National Association of Realtors began tracking data in 2001.“Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices,” said Lawrence Yun, chief economist at the National Association of Realtors.
And there’s the rub. Housing’s biggest challenge right now is inventory–there are too few homes for sale to meet buyer demand. Homeowners are staying put instead of moving and builders aren’t breaking ground fast enough.
In April, the inventory of properties on the market fell for the seventh month, Redfin data showed, and new for-sale listings fell for the first time since August 2014.
Low mortgage rates can do only so much to stoke sales. For now, the home inventory shortage, not rate fluctuations, is what’s holding the market back.
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