A new report from Twin Cities homebuilders shows that steady increases in mortgage rates continue dampening demand for new housing in the Twin Cities metro area.
The 30-year fixed-rate mortgage (FRM) rose to an average 6.7% with an average 0.9 point, according to a weekly report from Freddie Mac. That's up from last week when it averaged 6.29% and from 3.01% a year ago, putting rates at their highest level since 2007.
Higher borrower costs are putting homebuilders — and new home buyers — in a more conservative mood as home sales in the metro moderate.
During September, homebuilders pulled 410 permits to build single-family homes in the metro, according to a report released Friday by Housing First Minnesota, a trader group that represents homebuilders. The number of permits was 27% fewer houses than in the same month last year when demand was reaching a peak.
Declines in for-sale new housing have been offset by an increase in demand for new rental housing as higher borrowing costs are forcing some would-be buyers to rent instead.
Multifamily construction showed modest gains during the month that were in line with earlier months. During the month builders were issued enough permits to build 1,221 units, mostly market rate rental apartments. That was a 6% increase over last year.
"Unfortunately, rising interest rates have drastically impacted what buyers can afford and many have been forced to put their home buying dreams on hold," said James Julkowski, the 2022 board chair of Housing First Minnesota and a Twin Cities area builder and remodeler.
Sam Khater, Freddie Mac's chief economist, said in a statement that the uncertainty and volatility in financial markets is heavily impacting mortgage rates.
