30-Year mortgage rate remained under 3 percent for the fourth straight week, reaching the lowest level since mid-February. The move kept supporting housing prices which rose at an unprecedented pace in the first quarter.

According to Freddie Mac, the 30-year fixed-rate mortgage (FRM) averaged 2.94 percent for the week ending May 13, 2021. It was down from the previous week when it averaged 2.96 percent. A year ago at this time, the 30-year FRM averaged 3.28 percent.

Over the same period, Freddie Mac report also showed the 15-year fixed-rate mortgage fell slightly. It averaged 2.26 percent (lowest since mid-February and down from 2.30 percent last week). A year ago at this time, the 15-year FRM averaged 2.72 percent.

In this context, Sam Khater, Freddie Mac’s Chief Economist, said “the low mortgage rate environment has been a boon to the housing market but may not last long as consumer inflation has accelerated at its fastest pace in more than twelve years and may lead to higher mortgage rates in the summer.“

Housing Prices Rose At An Unprecedented Pace In The First Quarter

Data released earlier this week confirmed that the drop of the 30-year mortgage rate (observed since the beginning of 2020) resulted in a spike of housing prices growth. Bloomberg reported “The median price for a single-family home in the U.S. rose the most on record in the first quarter, as buyers fought over a dearth of inventory, according to the National Association of Realtors. Prices jumped 16.2% from a year earlier to a record high of $319,200. The growth eclipsed the 14.8% rate in the fourth quarter, which was the highest in data going back to 1989, the group said in a report Tuesday.“

#Housing | 🇺🇸 U.S. Home Prices Surge the Most on Record in Buying Frenzy - Bloomberg
*Link: https://t.co/meVnFHvQ1s pic.twitter.com/qOkPDu7y7W

— Christophe Barraud🛢 (@C_Barraud) May 12, 2021

The acceleration of housing prices growth was recently confirmed by Corelogic data. The Corelogic House Price Index for March grew by 11.27% YoY (up from 10.28% YoY in February). It was the fastest increase since March 2006. In this context, the S&P Corelogic index for March — that will be released on May 25th — should increase by almost 13 percent on a YoY basis.

Housing Prices Growth Is Close To A Top

Nevertheless, even if mortgage rates remain low, housing prices growth is likely to slow this summer due to unfavourable base effects and a likely rebound in inventory. Yesterday, Bill McBride noted that “existing home inventory might have bottomed in March“.

Existing Home Inventory Might Have Bottomed https://t.co/TTqXClbGT3 pic.twitter.com/2wV8nm7zU1

— Bill McBride (@calculatedrisk) May 13, 2021

Lastly, President Joe Biden extended the foreclosure moratorium and mortgage forbearance through the end of June, which limited inventory and downward prices pressure. Therefore, the normalization is also expected to cap housing prices growth from July 2021.