New data from Freddie Mac shows the average rate on a 30-year mortgage is now at 4.67%, the highest level since 2018.
This increase is mainly due to the expectation that the Federal Reserve will continue to raise interest rates, as it did last month. But the Fed’s plan to slow inflation could also slow housing construction.
Rising rates can make all types of loans more expensive, including those that developers take out to build homes.
“This is yet another factor driving up the cost of construction,” said Robert Dietz, chief economist for the National Association of Home Builders.
In the short term, rising interest rates could cool house prices, he said. But in the long term, they could make a big problem in the housing market even worse – the lack of supply.
“It’s going to have housing stock impacts in three or four years,” Dietz said.
And the higher financing costs come at a difficult time for homebuilders, said Dan Dunmoyer, president and CEO of the California Building Industry Association.
“Nails, fasteners, hinges, every component has gone up in price over the last year,” Dunmoyer said.
Eventually, he said, those costs will be passed on to homebuyers.
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