The average rate on a 30-year fixed-rate mortgage dropped two basis points, the rate for the 15-year fixed fell one basis point and the 5/1 ARM was unchanged, according to a NerdWallet survey of

Holden Lewis

The average rate on a 30-year fixed-rate mortgage dropped two basis points, the rate for the 15-year fixed fell one basis point and the 5/1 ARM was unchanged, according to a NerdWallet survey of daily mortgage rates published Friday by national lenders.

The average rate on the 30-year fixed has risen four basis points in one week. The rate is 12 basis points lower than one year ago. A basis point is one one-hundredth of one percent.

Rates trend upward in 2018

Mortgage rates have been rising steadily so far in 2018, especially in the first two weeks of the year. The 30-year fixed averaged 4.09% on Jan. 2, and now it's up to 4.34% today " exactly a quarter of a percentage point.

'The economy's picking up, and rates are going to have to go up,' says Michael Moskowitz, president of Equity Now, a mortgage lender in New York City. 'The stock market went up so much that I think this time it's for real, because the wealth effect from the stock market is going to spill out into the economy.' Higher economic growth 'is going to necessitate higher rates,' he adds.

Meanwhile, the Federal Reserve is expected to keep raising short-term interest rates this year. Now, long-term mortgage rates don't exactly track the overnight rates that the Fed controls. Sometimes short-term rates and long-term rates move in opposite directions. But Moskowitz and other observers expect short- and long-term rates to be in sync this year.

Not a lot of homes for sale

This week provided data on home sales in December and for all of 2017.

Home prices continued to rise, and there's still a tight supply of homes for sale. That's especially true for existing homes that are on the market for resale.

According to the National Association of Realtors, 5.51 million existing homes were resold in 2017, a 1.1% increase over 2016 sales. Meanwhile, half of resold homes cost $247,300 or more in 2017, a 5.8% increase over the comparable median price for 2016. Meanwhile, fewer than 1.5 million existing homes were on the market at the end of December " just a 3.2-month supply. That's a terrible buyer's market.

'The lack of supply over the past year has been eye-opening and is why, even with strong job creation pushing wages higher, home price gains " at 5.8% nationally in 2017 " doubled the pace of income growth and were even swifter in several markets,' said Lawrence Yun, chief economist for the National Association of Realtors, in a news release.

Why is inventory so low?

One reason boils down to psychology. When homeowners ponder selling, they are prone to think: 'If it's going up in price, I don't want to sell it yet. If I can hold it for one more year, I can get 6%' more, says Ruben Gonzalez, staff economist for Keller Williams Realty.

Another reason is there are not enough affordable new homes for sale. According to the Census Bureau, despite more new homes being sold in 2017 than the year before, half of new homes cost $321,100 or more in 2017 " a 4.3% increase over the comparable median price in 2016. In December, one-quarter of newly built houses sold for $500,000 or more, according to the Census stats. Just 17% of newly built homes cost less than $200,000.

Still, Gonzalez sees builders slowly moving toward making more entry-level houses. 'Post-crisis, they mostly focused on the higher-end stuff, based on the lots they were already holding, and could get better margins out of a higher-end product, and their customers were likely to qualify for mortgages coming out of the crisis in that higher-end product range than in the entry-level range,' he says. 'But I think we're starting to see that change now, in the last year or two.'

MORTGAGE RATES TODAY, FRIDAY, JAN. 26:

(Change from 01/25)
30-year fixed: 4.34% APR (-0.02)
15-year fixed: 3.96% APR (-0.01)
5/1 ARM: 4.42% APR (NC)

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NerdWallet daily mortgage rates are an average of the published annual percentage rate with the lowest points for each loan term offered by a sampling of major national lenders. APR quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.