One year ago mortgage rates for new single-family homes reached 9.3 per cent. One month ago the rate had soared to 10.3 percent. By fall, some forecasts say, the figure could be close to 11.
These are national averages. But already some California lenders are charging 11 1/2 percent. And the U.S. League of Savings Associations says similar rates might occur elswhere by early fall.
Where will it end? When will buyers stop chasing prices and interest rates?
Pointing to a 2.1 percent decline in housing starts from March to April, some analysts say they already see the end in sight, but there are statistics that also suggest the turn might still be far off.
For example, regulations designed at least in part to restrain increases are falling in the path of the advance.
Less than a month ago the Department of Housing and Urban Development raised to 10 percent from 9 1/2 percent the maximum permissable rate on government-backed home loans.
And in Texas, the legislature passed a bill that would allow rates to rise to 12 percent from the current constitutional level of 10, one reason being that at less than 10 percent loans weren't being made.
Meanwhile, there has been little letup in price advances. If the rise in mortgage rates is large, then price increases must be termed enormous.
Based on Federal Home Loan Bank Board estimates, the average price of a new single-family home in April was $71,700, up $10,100 in just one year, and $3,000 in just one month.
The board estimates the average price of used homes has soared to $67,000 from $52,100 in only one year's time, although that figure could be misleadingly high, since averages are subject to distortion.
Still, a median sales price (half above, half below the stated price) based on actual sales as reported by the National Association of Realtors, comes in at close to $54,000, a rise of $7,500 in one year.
While nobody can be certain when the increases will end, there is plenty of evidence to explain how the inflated market happened. Among a dozen explanations, these stand out if only for their clarity:
Individuals see homes as an investment as well as shelter. With dollar purchasing power falling by 9 percent or so a year, real estate provides financial protection. Housing has become a collectible.
For some families, homes are the easiest of big ticket items to buy. Down payments in some instances are only 10 percent, and mortgage maturities have been stretched on average to nearly 29 years.
Forty-five percent of all American home buyers have more than one wage earner in the household, according to the U.S. League of Savings Associations, whose members make most of the nation's home mortgage loans. The same study showed 39 percent have secondary incomes that contribute 20 percent or more to total household income.
Buyers are aware of the tax advantages. They know that, in effect, Uncle Sam subsidizes housing for everyone, not just the poor. Real estate taxes and interest payments are deductible. And for those who rent out their homes, depreciation permits tax deferal.
Demographics and social change plays a role. There is a bulge in the age group 25 to 34 years. In addition, singles are now more inclined to buy. The U.S. League says they make up 17 percent of buyers.
It adds up to a special marketing situation, one that to some degree seems to act independently of other economic factors. Eventually it is bound to become more attuned to the general economy. But when?