Housing interest rates have risen recently due to economic factors and it is beginning to affect the U.S. housing market in a negative way.
The Commerce Department tracks numbers of new home construction. According to economists polled by The Wall Street Journal, the data signals a slow start to 2017 for housing as “housing starts were unchanged in January from a month earlier to a seasonally adjusted annual rate of 1.23 million.”
According to The Wall Street Journal, “While housing starts in 2016 had their best year since 2007, they remain well below precrisis levels. Roughly 1.17 million housing units were started in 2016, a far cry from the 2005 peak and below the annual average of 1.44 million since 1960.”
Although home prices seem to have recovered from the “precrisis” period, the increase in house prices didn’t benefit millennials because many of them didn’t own houses and had to live with their parents or rent apartments.
According to a study by the Pew Research Center, “Only 20% of young Americans between ages 25 and 35 said they changed addresses last year, lower than the mobility of the prior four generations when they were in that age range.”
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On top of that, there are older people who have extremely low mortgage rates locked in, causing them to be less likely to move now that rates are rising and the next house they would be purchasing would, undoubtedly, have a higher interest rate than the one they presently own.
Mortgage News Daily said, “The average 30-year fixed-mortgage rate was 4.24%, up more than half a percentage point since the election,” with the Federal Reserve probably planning on making a few more rate increases soon.
According to a recent survey by Mortgage Bankers Association, “Mortgage applications for home purchases fell in the week ended Feb. 10 to a 13-week low.”
The Journal report also states, “The National Association of Home Builders’ sentiment measure slipped in February for a second straight month after hitting an 11-year high in December.”
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