Offering slight relief to home buyers this week, the 30-year fixed-rate mortgage fell to a 3.09% average. But rates may rise again soon.

Housing analysts largely expect mortgage rates to increase in the following months due to the Federal Reserve’s announcement this week that it will slowly reduce its monthly bond purchases.

“While mortgage rates fell after several weeks on the rise, we expect future upticks due to strong economic data and as the Federal Reserve pulls back on its stimulus,” says Sam Khater, Freddie Mac’s chief economist. “That said, the housing market remains favorable for consumers, as rates remain below pre-pandemic levels and continue to support sustainable purchase and refinance opportunities.”

The National Association of REALTORS® forecasts the 30-year fixed-rate mortgage to average 3.5% by the second quarter of 2022.

How Will Higher Mortgage Rates Impact Home Buying?

Freddie Initiative Adds Rent Payments to Credit Reports

Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 4:

• 30-year fixed-rate mortgages: averaged 3.09%, with an average 0.7 points, falling from last week’s 3.14% average. Last year at this time, 30-year rates averaged 2.78%.
• 15-year fixed-rate mortgages: averaged 2.35%, with an average 0.6 points, decreasing from last week’s 2.37% average. A year ago, 15-year rates averaged 2.32%.
• 5-year Treasury-indexed hybrid adjustable-rate mortgages: averaged 2.54%, with an average 0.3 points, dropping from last week’s 2.56% average. A year ago, 5-year ARMs averaged 2.89%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

More homeowners have become pet owners since the pandemic, and homeowners are showing a willingness to move for their pet. In fact, 43% of pet owners say they’d be willing to move to accommodate their pet, according to the National Association of REALTORS®. What’s more, 68% of pet owners surveyed by realtor.com® say they would pass on the perfect home if it didn’t meet their pet’s needs.

“Often rentals have high pet fees, or may restrict the number of pets allowed in a unit,” Jessica Lautz, vice president of demographics and behavioral insights at NAR, writes on the association’s blog. “Purchasing becomes a choice for some buyers that may be driven with their pet in mind.”

Unmarried couples, single women, and millennials have shown the most willingness to move for their pets, according to NAR’s data.

Some home buyers are even shopping for homes with their pets in tow. They are seeking their pets’ feedback as they tour homes for sale. Twenty percent of 1,000 U.S. adults surveyed by Ally Home in April said they bring their pets to look at homes. Women were more likely to bring their pets with them on a house hunt than men.

In a separate survey this year conducted by Homes.com, one in five of about 1,600 homeowners surveyed say they have rejected a home for pet-related reasons.

Many buyers with pets say they’re looking for more space. They desire a secure fence, hardwood floors, plenty of yard space, a mudroom, and proximity to parks and play areas, the Homes.com survey found.

Home sellers continue to get richer as prices rise. Profit margins on median-priced single-family home and condo sales climbed to 47.6%, which marks the highest level in a decade.

The typical home sale nationwide during the third quarter generated a record-high profit of $100,178 as national median home prices continued to rise, ATTOM Data Solutions, a real estate data firm, reports. That is up from $88,800 in the second quarter of this year. Profit margins reflect the change between the median purchase and resale price.

The largest annual increases in profit margins in the third quarter occurred in:

• Boise City, Idaho: margin up from 61.4% in the third quarter of 2020 to 130.3% in the third quarter of 2021
• Claremont-Lebanon, N.H.: up from 41.1% to 93.8%
• Augusta, Ga.: up from 19.6% to 56.6%
• Raleigh, N.C.: up from 30.4% to 67%
• Bellingham, Wash.: up from 69.5% to 105.6%

“The third quarter of this year marked another period in a banner year for a housing market boom that’s steaming ahead through its 10th year,” says Todd Teta, chief product officer at ATTOM Data Solutions. “Prices and seller profits again hit new highs since the market started coming back from the Great Recession in 2012.”

Still, Teta says there have been hints of a slowdown in recent weeks heading into what typically is a quieter fall and winter season. “The pandemic also remains a constant presence that could tamp things down,” he adds. “But, for now, the market engine seems to have nothing but high-octane gas in the tank.”

Expanding wealth and growing families are prompting more millennials to become homeowners. Ultra-low mortgage rates are continuing to attract them as well.

Young adults ranging from 26 to 41 years old comprise about 22% of the U.S. population. It’s why the housing market has been watching this age segment so closely for so long.

More millennials have become homeowners since the pandemic. Millennials have accounted for the largest share of home buyers over the past year—37%, reports Barron’s.

The pandemic is motivating purchases. The number of households headed by adults aged 30 to 44 years old jumped by 1.3 million during the pandemic.

Married couples ages 31 to 40 were more likely than any other age group to purchase homes, according to the National Association of REALTORS®. Also, the largest group of unmarried couples who purchased homes were adults between the ages of 22 to 30.

Millennials are approaching their peak earning years. “Over the next couple of decades, a quarter of the U.S. population is going to reach peak earning years, fueling continued housing demand—especially for inexpensive starter homes, which nationally had a beginning price of $304,200 in the second quarter of 2021,” Barron’s reports.

Remote work will only further housing demand, reports suggest. Millennials were the most likely generation to say that the reason for owning a home was to have a space of their own for a larger home, according to NAR’s data.

Student loan debt continues to hit this generation hard, however. That has made it more difficult to save enough to afford higher home prices. Read more: Student Debt Sidelines Half of Would-Be Buyers and Loosening the Yoke of Student Loan Debt

But housing analysts continue to remain bullish about the millennial generation’s impact on housing. Low interest rates, strong employment, and the growing perceptions over the importance of a home will likely continue to fuel a millennial housing boom, writes Dana Peterson for Barron’s.

The homebuying process can be scary for first-time and move-up buyers alike. Slightly more than half of Americans say they feel anxious thinking about the process of purchasing a property, according to a new survey from Ally Home. In fact, many consumers are more afraid of purchasing a home than dealing with their fear of commitment (89%), filing their tax returns (82%), having a tooth pulled (78%), or overcoming their fear of heights (75%), the survey found.

“Homes are a huge investment, so the purchasing process can feel daunting, especially for first-time buyers,” says Glenn Brunker, president of Ally Home. “From navigating fluctuations in home prices and mortgage rates to submitting an offer, there is a lot to juggle.”

Real estate professionals can help calm many of these fears for their clients. OJO Labs, a real estate company, surveyed 200 home buyers between July 2020 and July 2021 to learn the biggest fears among first-time and repeat buyers. Here’s an overview of what they found.

First-timers’ fears: “For first-time home buyers, financial-related fears made up four out of the top five fears,” the report from OJO Labs says. “Specifically, the fear of not being able to afford a mortgage and being too nervous to take a look at their own finances ranked as the second and third biggest fears.” First-time buyers also showed FOMO—fear of missing out—and worried that there could be better options they were missing out on.

Repeat buyers’ fears: Even home buyers who have previously gone through the process are still stressed about it. Repeat buyers’ biggest fear is that home prices will continue to rise, followed by a fear that inventory will continue to decline, according to the survey. FOMO also has them concerned.

In this hot market, many Americans are willing to overlook a few ghosts for the right home and list price. Nearly a third—or 30%—say they’d be willing to live with a “friendly” ghost, according to realtor.com®’s annual Halloween survey. Twenty percent say they would live in a home where a murder has taken place. “In today’s ultra-competitive housing market, buyers are looking for a break,” says Clare Trapasso, realtor.com®’s deputy news editor. “The majority are willing to consider homes that are rumored to be haunted, especially if they can get these properties at a discount.”

Sixty-three percent of respondents say they’d be willing to live in a haunted house at a discounted price. Most respondents say they would expect more than 20% off the market price for a haunted home. Sixty-nine percent say that if a murder has taken place in the home, they expect more than 10% shaved off the market price; nearly a quarter say they’d want a discount of more than 50%, the survey found.

Nearly three-fourths of respondents who believe they’ve lived in a haunted home before say they didn’t know until after they moved in, citing strange noises, an eerie feeling in certain rooms, shadows, odd pet behavior, items moving on their own, and hot or cold spots. Some respondents report ghost sightings (33%), lights turning on and off (31%), or levitating objects (12%).

“Home buyers who are concerned about a home’s past should be sure to ask questions and do some research before they buy a new house,” Trapasso says. “Only a few states require sellers to inform house hunters if someone died on the property. Some people who find themselves living in a home they believe to be haunted turn to specialists, like paranormal investigators, spiritual healers, and even church-sanctioned religious leaders.”

While many home buyers are still eager, some may have taken a break from what’s been a red-hot, competitive housing market. The National Association of REALTORS®’ Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, decreased 2.3% in September from August, and pending home sales are down 8% compared to a year ago.

Still, NAR’s Pending Home Sales Index was at a 116.7 reading for September. An index reading of 100 is equal to the level of contract activity in 2001. Therefore, the housing market still remains on very solid ground.

“Contract transactions slowed a bit in September and are showing signs of a calmer home price trend, as the market is running comfortably ahead of pre-pandemic activity,” says Lawrence Yun, NAR’s chief economist. “It’s worth noting that there will be less inventory until the end of the year compared to the summer months, which happens nearly every year. Some potential buyers have momentarily paused their home search with intentions to resume in 2022.”

The number of homes for sale remains low. Yun expects inventory to turn a corner in 2022 as more listings to come onto the market. That could be welcome news to home buyers who, over the past year and a half, have encountered a historically low number of homes for sale.

An increase in housing inventory could also be a relief to renters. “Rents have been mounting solidly of late, with falling rental vacancy rates,” Yun says. “This could lead to more renters seeking homeownership in order to avoid the rising inflation, so an increase in inventory will be welcomed.”

Each of the four major U.S. regions saw contract activity decline month over month and year over year in September, NAR reports. The Northeast saw the largest yearly drop.

Housing Market Expectations for 2022

Even with limited housing inventory, housing has still posted strong sales this year. NAR forecasts home sales to rise by 6.4% for 2021. But due to higher anticipated mortgage rates—30-year rates are moving up from the sub-3% averages from earlier this year—NAR projects sales to decline by 1.7% in 2022 as some buyers get priced out.

NAR projects more tempered home prices in the new year. Home prices likely will moderate with a 2.8% growth in 2022, which would follow this year’s double-digit growth of 14.7%.

High lumber prices are returning, and home buyers should brace themselves for impact. The prices can have an effect on the cost of a new home as well as on decks and remodels.

Lumber prices had been falling this summer, but that appears to have been short-lived. In August, lumber prices had bottomed out, but framing lumber is now up by 40% since then.

Lumber prices still remain below the peak reached in May of about $1,515 per 1,000 feet. On Tuesday, lumber futures were trading for about $735.70 per 1,000 feet, more than double the prepandemic five-year average of around $356,  National Mortgage News reports.

But housing analysts warn that lumber prices aren’t finished climbing.

Lumber is critical for both the new-home construction process and remodeling. High lumber prices were being blamed for price increases in the new-home market. In May, builders reported that soaring lumber prices were adding $36,000, on average, to the price of a new home.

It looked like the new-home industry was going to catch a break this summer when lumber prices started to plummet. However, pent-up demand refueled the market and is leading to another round of price increases, Scott Reaves, director of forecast operations at Domain Timber Advisors, told Fortune. Also, supply shortages are pressing on prices.

“We expect the demand for lumber to continue increasing through 2022 and beyond in response to demographically driven housing needs, which will bode well for not only lumber mills but forestland owners,” Reaves said.