For the third week in a row, mortgage rates inched upward, but economists were quick to reassure home buyers and potential refinancers that rates remain still remain well below year-ago averages.

“After dropping dramatically in late March, mortgage rates have modestly increased since then,” says Sam Khater, Freddie Mac’s chief economist. “While this week marks the third consecutive week of rises, purchase activity reached a nine-year high—indicative of a strong spring homebuying season.”

Freddie Mac reports the following national averages with mortgage rates for the week ending April 18:

• 30-year fixed-rate mortgages: averaged 4.17 percent, with an average 0.5 point, rising from last week’s 4.12 percent. Last year at this time, 30-year rates averaged 4.47 percent.
• 15-year fixed-rate mortgages: averaged 3.62 percent, with an average 0.5 point, rising from last week’s 3.60 percent average. A year ago, 15-year rates averaged 3.94 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.78 percent, with an average 0.3 point, falling from last week’s 3.80 percent average. A year ago, 5-year ARMs averaged 3.67 percent.

Affordability is a much more pertinent issue for renters than homeowners, according to new research from CoreLogic, a real estate data firm. Since 2005, the monthly cost to rent a single-family home has risen significantly, while the monthly principal-and-interest mortgage payments of homeowners dropped slightly.

CoreLogic’s national rent index jumped 36 percent in December 2018 compared to December 2005. On the other hand, the typical mortgage payment fell 4 percent over that same period.

Researchers say mortgage rates have made a big difference in the change. In December 2005, the 30-year fixed-rate mortgage averaged 6.3 percent. In December 2018, 30-year rates were at a considerably lower average of 4.6 percent. Even though the median sales price in 2005 was only $190,000, compared to $220,305 in 2018, the typical monthly mortgage payment was still lower because of the lower mortgage rates ($941 in 2005 versus $904 in December 2018), researchers note.

CoreLogic factored in about a dozen of the largest metro areas and found seven posted rent increases of 27 to 61 percent between December 2005 and December 2018. That coincided with declines in the typical mortgage payment that ranged from 3 to 24 percent.

Homeowners are less “cost burdened” than renters. In 2017, about 27 percent of homeowners with a mortgage were considered “cost burdened,” which means 30 percent or more of their income was devoted toward the monthly mortgage payment and owner expenses. That has dropped 10 percentage points since 2007, according to U.S. Census Bureau data. On the flip side, 46 percent of renters were considered cost-burdened in 2017, up slightly from 45.6 percent in 2007.

“The share of cost-burdened renters remained fairly steady over that decade while the share of cost-burdened owners dropped significantly,” researchers noted. Homeowners may have been able to lessen their costs by refinancing—sometimes repeatedly—as mortgage rates dropped during that period, researchers say. Also, during the foreclosure crisis in 2007 and 2008, some homeowners may have lost their home due to higher costs. They wouldn’t have been represented in the 2017 data since they are no longer homeowners, researchers add.

In recent months, rental prices have shown signs of cooling, and mortgage payments are starting to inch up due to higher home prices, CoreLogic researchers added.

Homeowners significantly underestimate the costs involved when planning a home improvement project, finds a new study from Discover Home Equity Loans, based on a survey of 1,200 Americans.

Estimated Cost of Common Interior Remodeling Projects

• New master suite/owner’s suite: $125,000
• Kitchen upgrade: $35,000
• Complete kitchen renovation: $65,000
• Bathroom renovation: $30,000
• Adding a new bathroom: $59,000
• Basement conversion to living area: $40,000
• Attic conversion to living area: $75,000
• Insulation upgrade: $2,100
• New wood flooring: $5,500
• Hardwood flooring refinish: $3,000
• HVAC replacement: $7,475

 

Eighty-two percent of consumers believe the home they own is a financial asset, the study says. As such, they want to tackle home improvement projects to increase the value of their home even more. More than half—52 percent—of consumers say they plan to take on a home improvement project in the next year. Kitchen and bathroom remodels lead in projects. (Read more: Design TV Shows Are Inspiring Optimistic Home Renovators)

But many consumers have failed to save enough. Sixty-four percent of consumers say their home improvement project will cost under $15,000. However, bathroom remodels can cost anywhere from $19,000 upwards to $61,000; significant kitchen remodels can cost upwards to $125,000, according to the study.

Given their low estimates for projects, homeowners are falling short in paying for their projects. Only a quarter say they’ll have enough funds to cover the likely cost of the project, the study showed.

“Home improvement projects can quickly add up and oftentimes cost more than someone anticipates,” says PK Parekh, senior vice president of Discover Home Equity Loans. “Which is why people should be financially prepared and determine which payment method makes the most sense within their own financial situation.”

Homeowners differ on how they’re financing their home improvement projects. Thirty-four percent prefer to use cash for a home improvement project, followed by 23 percent who say they plan to use a credit card. Other owners say they are considering borrowing against the equity in their home, such as through a home equity line of credit (18 percent), home equity loan (13 percent), or cash-out refinance (7 percent).

Mortgage rates have hovered at multi-month lows in recent weeks, but this week, rates inched up across the board. However, economists say they expect overall borrowing costs to remain low, despite the slight uptick.

“Rates moved up slightly this week while mortgage applications decreased following last week’s jump in rates—indicating borrower sensitivity to changing mortgage rates,” says Sam Khater, Freddie Mac’s chief economist. “Despite the recent rise, we expect mortgage rates to remain low, in line with the low 10-year Treasury yields, boosting home buyer demand in the next few months.”

Freddie Mac reports the following national averages with mortgage rates for the week ending April 11:

• 30-year fixed-rate mortgages: averaged 4.12 percent, with an average 0.5 point, increasing from last week’s 4.08 percent average. Last year at this time, 30-year rates averaged 4.42 percent.
• 15-year fixed-rate mortgages: averaged 3.60 percent, with an average 0.4 point, increasing from last week’s 3.56 percent average. A year ago, 15-year rates averaged 3.87 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.80 percent, with an average 0.4 point, increasing from last week’s 3.66 percent average. A year ago, the 5-year ARM averaged 3.61 percent.