Real Estate Logic 101: Buyers always prefer new construction, even though new construction prices are rising. Therefore, mortgage rates are going up.

That’s according to the Freddie Mac Primary Mortgage Market Survey, which reported that new-home sales and price appreciation had driven the average 30-year fixed-rate mortgage to 3.8% this week, up from 3.76% last week. That’s actually down from this time last year, when it averaged 4.37%.

New-home sales were largely flat in January but are up 5.3% from last year. The median price of that newly constructed house is now $294,300, up from $218,000 last January, according to the Census Bureau and the Department of Housing and Urban Development.

“The issue is affordability. Builders have traded higher prices and margins and steady demand for opportunity of higher volumes,” said Jonathan Smoke, chief economist atrealtor.com®. “Supply isn’t growing, and it isn’t helping the lack of supply on existing-home side, so we will continue to see home shoppers report that they can’t find homes to fit their needs and/or budget.”

In this tight inventory market, there’s only a 5.4-month supply of new homes to feed buyer demand at the current sales rate. In a normal market, there would be six months of inventory available. Heck, during the housing market heyday, builders would have spec homes built and ready for the next buyer. But those days are gone.

Many would-be buyers simply can’t find a home to purchase in this low-inventory environment. That said, purchase mortgage applications declined 3.5% from a week earlier, according to the Mortgage Bankers Association. Refinances were also lower, diving 8%.

The bright spot: FHA loans, a homebuilder loan of choice. FHA loan applications increased slightly to 15.3% of all application activity this week but accounted for only 8.7% of applications in the second week of December. As the monthly insurance premiums for these government-backed loans have been slashed, its market share has increased.  Likewise, VA loans increased to 9.6% this week from 8% last week, according to the MBA.

Mortgage rates

• 15-year fixed-rate mortgage averaged 3.07% this week, up from 3.05% last week. A year ago at this time, the 15-year FRM averaged 3.39%
• 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.99% this week, up from 2.97% percent last week. A year ago this week, it averaged 3.05%.
• 1-year Treasury-indexed ARM averaged 2.44% this week, down from last week, when it averaged 2.45%. At this time last year, it averaged 2.52%.