Mortgage rates rose this week after the Federal Reserve announced it would accelerate its bond tapering and that three rate hikes would come in 2022. The 30-year fixed-rate mortgage rose to 3.12% this week, Freddie Mac reports.

Rates are largely expected to continue to rise due to the Fed’s recent announcement. But National Association of REALTORS® Senior Economist Nadia Evangelou says home buyers shouldn’t panic. By historical standards, mortgage rates will remain low and under 4% over the next year. In 1980, the average 30-year fixed-rate mortgage was 13.7% and 8% in 2000.

This week “mortgage rates inched up as a result of economic improvement and a shift in monetary policy guidance,” says Sam Khater, Freddie Mac’s chief economist. “While house price growth is slowing, prices remain high due to solid housing demand and low supply. We expect rates to continue to increase into 2022 which may leave some potential home buyers with less room in their budgets on the sideline.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 16:

• 30-year fixed-rate mortgages: averaged 3.12%, with an average 0.6 point, rising from last week’s 3.10% average. A year ago, 30-year rates averaged 2.67%.
• 15-year fixed-rate mortgages: averaged 2.34%, with an average 0.7 point, dropping from last week’s 2.38% average. Last year at this time, 15-year rates averaged 2.21%.
• 5-year Treasury hybrid adjustable-rate mortgages: averaged 2.45%, with an average 0.3 point, unchanged from the previous week. A year ago, 5-year ARMs averaged 2.79%.

Freddie Mac reports average commitment rates along with average fees and points to better reflect the total upfront cost of obtaining the mortgage.

Buyers have been drawn to new-home construction as existing housing inventories remain lean. Builders have struggled to ramp up construction even more due to the high demand as building materials, labor, and lot shortages loom.

However, builders say they’re building as much as they can and as quickly as they can given such challenges.

Housing starts for both single-family and multifamily homes rose 11.8% to a seasonally adjusted annual rate of 1.68 million units in November, the U.S. Department of Housing and Urban Development and U.S. Census Bureau reported on Thursday. Broken out, single-family housing starts increased 11.3% to a 1.17 million annual rate while the multifamily sector, which includes apartment buildings and condos, climbed 12.9% to an annual 506,000 pace.

“Single-family housing starts accelerated near the end of 2021 and are up 15.2% this year-to-date as demand for new construction remains strong due to lean inventory of resale housing,” says Chuck Fowke, chairman at the National Association of Home Builders. “Policymakers need to help alleviate ongoing building material supply chain bottlenecks that are preventing builders from keeping up with buyer demand.”

Single-family completions within new-home construction will increase in 2022, adds Robert Dietz, the NAHB’s chief economist. This will bring “more inventory to market despite a 19% year-over-year rise in construction material costs and longer construction times,” he says.

Regionally, new-home construction starts including both single-family and multifamily housing on a year-to-date basis (January through November of 2021) were up by the most in the Northeast, jumping 24.4% compared to the previous year. Gains followed by 19.4% in the West, 15.4% in the South, and 9.6% in the Midwest.

Permits—a gauge of future construction—climbed 3.6% in November to a 1.71 million unit annual rate. Permits are rising by the most in the West and South.

Sixty-nine percent of about 1,000 homeowners recently surveyed say they felt “house poor,” a new study from research company ConsumerAffairs shows. Homeowners blame unexpected repair, maintenance, and upkeep costs as some of the reason why.

But despite the rise in costs, nine in 10 still believe homeownership is worth it and is a good long-term option that is better than other options, the survey finds.

Purchasing a home is often the biggest financial expense most people ever make. Are some homeowners taking on more than what they can handle? Forty-three percent of respondents say their home is harder to afford than they expected.

Housing is becoming more expensive. As home prices have risen by double digits over the past year, monthly mortgage payments have increased by 3.1% whereas the median family income has risen by just 0.7% in comparison, according to the National Association of REALTORS®’ Housing Affordability Index.

“It’s not surprising that 54% of homeowners reported that house-related expenses are their most considerable financial burdens, despite their homes being their most significant asset,” the study notes. “What might be surprising, though, is that 40% indicated that their housing expenses are more than they can afford.”

Homeowners may be underestimating many costs involved in homeownership.

The Federal Reserve said on Wednesday that it plans to have multiple rate increases in 2022 and will taper its monthly asset purchases at a quicker, much more aggressive pace than analysts originally anticipated. What could this mean for mortgage rates?

CNBC reports “the days of rock-bottom rates are nearly over.”

The Fed’s benchmark short-term interest rate does not directly influence mortgage rates but it does often influence them. The Fed expects the central bank’s benchmark interest rate to increase to 0.9% in 2022, up from a prediction of 0.3% in September.

“For consumers, the writing is on the wall that interest rates are likely to start climbing in 2022,” Greg McBride, chief financial analyst at Bankrate.com, told CNBC. That likely includes long-term mortgage rates, since they are influenced by economic conditions and inflation.

The Fed said it’s moving more briskly to try to manage inflation. “We are prepared to use our tools to make sure high inflation doesn’t get entrenched,” Fed Chair Jerome Powell said in a video news conference. “This is a strong economy, one in which it’s appropriate for interest rate hikes.”

Last month, consumer prices moved higher, reaching 6.8% annually in November, prompting increased concerns over inflation.

In the housing market, mortgage rates are being closely watched since they have a big impact on home shoppers’ purchase power. The average 30-year fixed-rate mortgage has already increased to 3.24%, and LendingTree analysts now expect rates to climb near 4% by the end of 2022. National Association of REALTORS® Chief Economist Lawrence Yun has predicted that mortgage rates will average 3.5% in 2022, although that prediction was made before the Fed’s actions Wednesday.

But home shoppers shouldn’t panic: Rising mortgage rates—even approaching 4%—will still remain near historical lows, analysts say. Also, higher rates could slow the housing market somewhat, which wouldn’t necessarily be a bad thing, Jacob Channel, senior economic analyst at LendingTree, told CNBC. “Higher rates are likely to decrease demand for new housing; would-be home buyers might find themselves with a greater selection of homes to choose from in 2022,” Channel says.

More first-time buyers hope to transition from renting to owning in 2022. After a challenging 2021, many are looking ahead to the new year for an opening in the market—one where competition may not be as tight as it has been this year.

Aspiring first-time buyers are already actively looking: 40% say they’re researching home values in their target neighborhood, 34% say they’ve researched the real estate process, 30% have talked to family and friends for advice, 25% have been in contact with a real estate agent, and 15% have been preapproved for a mortgage, a new survey from realtor.com® finds.

Sixty-one percent of first-time buyers are looking for a home priced at or below $350,000, according to the realtor.com® survey. To be competitive, 34% of first-time buyers say they are checking listings every day; 25% say they’re willing to put more than 20% down; 22% say they’re willing to make an offer within 48 hours of seeing a home they want; 22% say they’re willing to go over budget. However, they are less willing than other buyers to forgo contingencies or compete in a bidding war, the survey finds.

The housing market is hot, but some homeowners may overestimate just how hot it is when they go to sell. Real estate professionals shared with realtor.com® a few unrealistic expectationss that some of their sellers have had, such as that their home has doubled in value since they bought it or that they shouldn’t have to make any repairs before closing.

“One of the biggest mistakes sellers can make is going with aspirational pricing just because it is a seller’s market,” Jeremy Bolger, a real estate salesperson with Brown Harris Stevens in New York City, told realtor.com®. “We have seen many deals get multiple offers and go at or over ask, but they almost always stem from buyers sensing some form of value. And if there is no perceived value, buyers will often stay on the sidelines, even with limited inventory.”

Not everything will sell for a price far above list price or as quickly as in a few days—or mere hours—even in this hot housing market. Real estate pros told realtor.com® that some of their sellers believe their home will sell in a few days and then become disappointed when it doesn’t. Homes that need some repairs, are in a higher price range, or have quirky features may still linger on the market, realtor.com® notes.

Also, even in a seller’s market, homeowners will still need to make repairs. Investors may be willing to overlook some repairs, but many buyers are in search of move-in ready, agents say.

“If the seller has a place that needs a touch-up or decorative work, it’s usually a good idea to do it ahead of listing,” Bolger told realtor.com®. “Construction and renovation costs are up sharply with all the supply chain issues. Buyers can be wary of purchasing a place that they will have to do work on, especially since the money spent there needs to be fully out of pocket versus buying a move-in-ready product and having everything rolled into the mortgage.”

Rising home prices and shrinking inventories are pressing on affordability, the National Association of REALTORS® reports. Home buyers are struggling to find a home to buy—and one they can afford.

The share of homes available and affordable for a household earning $100,000 has fallen considerably over the past two years, NAR reports. In October, home prices climbed 13% while housing inventories fell 12% compared to a year ago, NAR reports.

View Affordability in Your Area: NAR’s Housing Affordability Index

“Due to weaker affordability and lower inventory, there are 503,000 fewer homes available for sale that this household can currently afford to buy compared to two years ago,” Nadia Evangelou, NAR’s senior economist and director of forecasting, writes on the association’s Economists’ Outlook blog.