Higher rates add to buying rush

7-year high for mortgage percentages spurs home sales

U.S. homebuyers, already contending with escalating prices, now are getting hit with the most- expensive mortgage rates in seven years. Funny thing: It’s only making them move faster.

The average rate for a 30- year fixed mortgage jumped to 4.61 percent, up from 4.55 percent last week and the highest since May 2011, Freddie Mac said in a statement Thursday. And homes that sold last month went into contract after a median of 36 days on the market — a record speed in data going back to 2010, according to a new report by brokerage Redfin Corp.

“This is what happens when the economy is strong,” said Sam Khater, Freddie Mac’s chief economist. “All the higher-rate environment does is it either causes them to try and rush or look at different properties that are more affordable.”

The solid data that are increasing confidence in the economy have sent benchmark Treasury yields soaring, and homebuyers — encouraged by income growth and low unemployment — are rushing to lock in loans before borrowing costs climb even higher. With a short supply of listings, the increased competition is only making their purchases harder to afford.

House prices jumped 7.6 percent in April from a year earlier to a median of $302,200, and sellers got a record 98.8 percent of what they asked on average, Redfin said Thursday.

Bidding wars aren’t uncommon. Mary Sommerfeld, a Minneapolis-area Realtor,

said a family she works with offered $33,000 more than the $430,000 list price for a house in St. Paul. The listing agent gave her the bad news: There were nine offers and the family’s was second from the bottom.

For Sommerfeld’s clients, the lack of inventory is a bigger problem than rising mortgage rates. If anything, they want to close quickly before they get priced out of the market — and have to pay more interest.

“I don’t think it’s hurting the buyer demand at all,” she said. “My buyers say they better get busy and buy before the interest rates go up any further.”

With this week’s jump, the monthly payment on a $300,000, 30-year loan has climbed to $1,540, up from $1,424 in the beginning of the year, when the average rate was 3.95 percent.

Kristin Wilson, a loan officer with Envoy Mortgage in Edina, Minn., tells customers to keep things in perspective. When she bought a house in the early 1980s, the interest on her adjustable-rate mortgage was 12 percent, she said.

“One woman actually used the phrase: ‘Rates shot up,’” Wilson said. “We’ve been spoiled after a number of years with rates hovering around 4 percent or lower.”

The average rate on 15- year, fixed- rate loans climbed to 4.08 percent from 4.01 percent last week.

The average rate for fiveyear adjustable- rate mortgages jumped to 3.82 percent from 3.77 percent last week. The fee remained at 0.3 percent.

The latest indications of a strong economy and rising commodity prices — gasoline is at a four-year high — lifted yields on bonds and mortgage rates followed suit.

AP/ROGELIO V. SOLIS Long-term U.S. mortgage rates jumped this week, marking their highest levels in seven years, a trend that is prompting homebuyers to lock in loans quickly on homes like this one in Jackson, Miss.