Purchase Demand Remains Strong as 30-Year Mortgage Rates Rise Above 4%

Last week, 30-year mortgage rates jumped above 4% after consecutive weekly gains at the start of 2022, though purchase demand remains strong, according to the CalculatedRisk Newsletter. Higher rates have caused a decline in refinance activity, and appraisals are falling short, but buying demand is still high.

Though current sales conditions are strong following a one point increase according to the NAHB Housing Market Index (HMI), builder sentiment fell in February as a result of heightened construction costs and ongoing supply chain impediments. Inventory is down 27.5% year-over-year to a total of 250,000 available units, forcing builders to play catch up despite persisting delays and challenges.

Existing supply is still at record lows. The weekly Altos Research survey showed Housing Inventory February 14th Update: Inventory Down 2.5% Week-over-week; New Record Low

Meanwhile, homebuilders are struggling with both price increases and supply constraints. The most recent new home sales report showed that the Inventory of homes under construction highest since 2007 and the most recent housing starts report showed Most Housing Units Under Construction Since 1973.

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