By Gabriella Cruz-Martinez

Mortgage rates dipped further away from 4% this week, following the decline in the 10-year Treasury yield amid intensifying fighting in Ukraine.

The rate on the average 30-year fixed home mortgage fell to 3.76%, down from 3.89% a week ago, according to Freddie Mac. A year ago, the 30-year loan rate averaged 3.02%.

Despite the decline, mortgage rates remain more than a half-point higher than just the end of last year, which has abruptly shut off refinance incentives and further complicated purchase plans for first-time homebuyers.

“Geopolitical tensions caused U.S. Treasury yields to recede this week as investors moved to the safety of bonds, leading to a drop in mortgage rates,” said Sam Khater, Freddie Mac’s Chief Economist. “While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty. Consequently, rates are expected to stay low in the short term, but will likely increase in coming months.”

Home prices hit record highs

The temporary relief from the ebbing of rates is the only good news homebuyers are getting lately from the housing market.

The U.S. median listing price hit record high of $392,000 in February, suggesting that the spring selling was off to an early start, according to new data from Realtor.com. Listing prices grew in 37 of the 50 largest metros in February, including hot spots like Las Vegas, Miami and Tampa, Florida, which each registered annual increases of at least 31%.

“Some people won’t list because they want to keep their low rate,” Len Kiefer, deputy chief economist for Freddie Mac, told Yahoo Money. “That’s going to put additional pressure on the market because there’s less homes on the market to sell, which are in really short supply now.”

For-sale inventory fell to an all-time low of 860,000 units in January, according to the Mortgage Bankers Association (MBA). This is a “cause for concern,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, who noted that the worst of the shortage skewed toward the “entry-level and less expensive options, making home-purchase conditions more difficult for first-time buyers.”

How much more difficult? At the median listing price and at current rates, the monthly mortgage payment is more than $278 per month compared with a year ago. Add in inflation on regular goods and the picture is bleaker.

“Surging prices and higher rates are creating challenges for first-time buyers looking for a home, causing them to make difficult choices in light of higher monthly costs for food, gasoline, clothing, cars and health care,” said George Ratiu, senior economist at Realtor.com.

Refinances ‘shut off’

For homeowners, the refinance boom witnessed during the pandemic is largely over — despite the temporary pull back in rates.

“Higher mortgage rates have quickly shut off refinances,” Kan said, “with activity down in six of the first seven weeks of 2022.”

Last month, there were just 3.8 million high-quality refinance candidates who could shave at least three-quarters of a point from their mortgage by refinancing as rates peaked 3.92%, according to mortgage technology and data provider Black Knight. That’s down from the 11 million eligible candidates from the first weeks of January.

That pool will shrink even more as “rates will climb further this year” said Realtor.com Chief Economist Danielle Hale.

“I expect overall refinance to go down,” Hale previously told Yahoo Money, “but you will still see some activity on the cash-out side of things.”

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