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Rising mortgage rates, tight supply, high prices frustrate house


Buyers head into an open house in Waldorf, Maryland.

Lisa Rizzolo | CNBC

The nation’s housing market has never been this tight, which is frustrating enough for house hunters, but now they have another problem.

Mortgage rates, which have hovered around record lows since the start of the Covid pandemic, are now rising. It’s what one potential buyer called “a perfect storm.” Another described it as “agony.”  

At a Sunday open house in Waldorf, Maryland, last weekend, there were already three offers on the three-bedroom home before it even started. By Tuesday, the agent’s deadline, there were nine.

“We’re stuck between a rock and a hard place,” said Rondie Robinson, who was there with his wife and daughter. Robinson said he recently got a new job and is looking to upgrade to a larger home.

“We thought that because of the winter months that it would slack off a little bit, prices would start to come back down to normal, but that’s not happening,” he said. “It’s anguish, it’s pain, it’s agony.”

Limited supply is taking a toll on sales. Pending home sales, which represent signed contracts on existing homes, fell more than expected from November to December, down 3.8%, according to the National Association of Realtors. The Realtors blame the drop on the extreme shortage of homes for sale, not on lack of demand.

New listings from sellers were down 8% year over year for the week ended Jan. 22, according to Realtor.com. Those listings have been below historical levels for eight of the last 10 weeks. As a result, active inventory, which is the total number of homes for sale, was down 28% from a year ago.

Buyers are coming out early this year, hoping to get a jump on the usually busy spring market. They are also concerned that in an already pricey housing market, rising mortgage rates could force them out.

“Between looming rate hikes, rising home prices and surging rents, today’s home shoppers have plenty of motivation to close while monthly costs might still be affordable,” said Danielle Hale, chief economist at Realtor.com.

The combination of fierce demand and low mortgage rates over the past two years caused home prices to rise at the fastest pace in several decades. While the year-over-year gains are starting to shrink nationally, prices are still at record highs, up close to 19% last November from November 2020, according to the S&P Case-Shiller index.

“We don’t want to wait, because likely when it does get warmer, more houses go on the market, and the rates get higher, it’s just gonna be kinda like the worst situation, like the perfect storm where things really go up,” said Mike Williams, who was at the open house in Maryland.

The home was priced at $375,000, right around the national median. But rising rates mean the monthly payment is now about $200 more than it would have been a year ago and $100 more than just three weeks ago. The average rate on the 30-year fixed mortgage was below 3% at the start of last year and is now hovering around 3.7%.



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