Home Buyers

Mortgage bankers throughout the country are lowering their forecasts for the year as interest rates continue to rise, making homeownership even more expensive. According to the Mortgage Bankers Association, overall mortgage originations, including refinancing loans, will exceed $2.58 trillion in 2022, down 35.5% from 2021. 

The MBA’s estimate, which represents more than 2,000 companies in the industry, reflects some startling economic realities in the United States. The housing market is tight on supply, and prices are high. The United States is dealing with the highest inflation in four decades, and the Federal Reserve is hiking interest rates rapidly to keep it in check. Refinancing demand has dropped considerably in recent months as interest rates have risen. Applications to refinance a home loan declined 5% in the previous week, and the refinance proportion of overall mortgage applications fell to 37.1% from 38.8% the week before. Read More

MBA Weekly Applications Survey April 6, 2022: As Rates Push 5%, Applications Drop Again

For the third week in a row, mortgage interest rates have crept closer to 5%, taking a toll on mortgage applications, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 1.

The application Index declined 6.3 percent from the previous week. The refinance share of mortgage activity decreased to 38.8 percent of total applications from 40.6 percent the last week. The Purchase Index fell by 3% from the previous week. 

“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019.” Read More

Purchase Applications Remain Resilient While Refis Keep Sliding

Interest rates and mortgage refinance demand have a solid and predictable relationship. Rates rise, and refinances fall. Rates are highest in years, but refis are lowest in years. That’s a scenario that’s been unfolding since mortgage rates hit their most recent notable low in August 2021. However, the drop in refinance activity has been relatively linear, with activity only recently reaching long-term lows in 2018. According to the Mortgage Bankers Association’s weekly application survey, refi applications fell 14% in the most recent week, marking one of the steepest drops in this recession cycle. 

Purchases continue to do substantially better in both the short and long term. Except for the post-covid demand boom, they were only down 2% this week and have been mainly flat for the preceding several weeks at levels that are still better than most of the previous decade.

Housing Boom To Lose Steam By The End Of Summer

Ian Shepherdson, chief economist and founder of research consulting firm Pantheon Macroeconomics, anticipates a 25% drop in existing-home sales between February and summer, reducing the yearly rate to 4.5 million from 6.02 million in real terms.

“The housing market is in the early stages of a substantial downshift in activity, which will trigger a steep decline in the rate of increase of home prices, starting perhaps as soon as the spring,” Shepherdson wrote in a note.

The forecast is based on the Mortgage Bankers Association’s data, suggesting an 8% drop in loan applications. Shepherdson reckons that the average monthly mortgage payment has climbed by almost $400. It could also be a warning sign for the housing market. If the market slows, many potential sellers may decide not to list to avoid being “the last person trying to sell into a falling market,” which would exacerbate current supply challenges.

Bidding Wars Reached Record High in February, Redfin Reports

According to new Redfin data, bidding wars arose in 68.6% of the house offers filed by Redfin agents nationwide on a seasonally adjusted basis in February. In February, the bidding war rate was the highest in Redfin’s records, which go back to April 2020.

As the government attempts to contain inflation, mortgage rates have risen. For the first time since 2019, the average 30-year fixed mortgage rate surpassed 4%, reaching 4.16 percent during the week ending March 17. This week, the Federal Reserve hiked rates for the first time in four years. Despite economic uncertainties caused by the Ukraine conflict, the administration expects six more rate hikes this year.

Many homebuyers have resorted to townhouses because they have been driven out of the single-family home market due to rising housing prices. With a bidding war rate of 76.6 percent in February, homes listed in the $1 million to $1.5 million categories were the most likely to encounter competition. Properties priced between $600,000 and $800,000 came in second (73.8 percent), followed by homes priced over $1.5 million (73.1 percent).

Next week’s potential market-moving reports are:

• Monday, March 28th – No Report
• Tuesday, March 29th – National House Price Index, Job Openings, Quits
• Wednesday, March 30th – Employment Report, Gross Domestic Income
• Thursday, March 31st – Initial Jobless Claims, Continuing Jobless Claims
• Friday, April 1st – Unemployment Rate, Construction Spending

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.