What’s falling? Largest Drop in Mortgage Rates in 41 Years, Mortgage Applications Drop in October and Existing Home Sales Fall 9th Straight Month

Mortgage Rates

Largest Drop in Mortgage Rates in 41 Years

Last week saw the most significant weekly drop in mortgage rates since November 1981, falling by almost a half percent.

According to Freddie Mac, the typical 30-year fixed mortgage rate decreased from 7.08% to 6.61%. The dip comes after a 10-year Treasury rate sharply fell last week after data from the government revealed that inflation slowed last month. The rapid price drop provided some respite to still-active homebuyers and sellers who were under pressure from high prices, which increased activity in the otherwise slow market.

The drop in rates incentivized buyers to rush and try to lock rates this weekend, the difference in demand was significant,” said Adriana Perezchica, president of Via Real Estate. “Until recently, buyer demand had weakened as borrowers have had a hard time keeping up with higher rates and home prices. We don’t know how long this dip in rates will last…and buyers are absolutely racing to lock a rate.

As per the Mortgage Bankers Association‘s most recent survey of applications, demand for mortgages increased last week as the number of purchase applications rose by 4%.

October Sees 29% Drop in New Home Mortgage Applications

According to data from the Mortgage Bankers Association (MBA), mortgage applications for new home purchases have slowed down in October on both a monthly and annual basis.

Based on the most recent data from the MBA’s builder application survey, there were even fewer new home purchases in October (-13%) than in September and a 28.6% decrease from last year. The data does not include the usual seasonal pattern corrections.

The abrupt increase in mortgage rates to 7%, according to MBA vice president and deputy chief economist Joel Kan, reduced both the overall demand for new homes and the spending power of many potential buyers, which had a negative impact on the results of new home purchases.

Kan further observes that the average loan size dropped to $400,616 from $406,767 the month prior and an 8% reduction from its peak in April of this year. The MBA cited slower home price growth and a decline in demand for more expensive properties as the causes of the most recent “moderation” in loan amounts.

Conventional loans accounted for 68.6% of loan applications in October, followed by FHA loans (20%), Veterans Affairs loans (11%), and USDA rural housing service loans (0.3%).

Existing Home Sales Fall 9th Straight Month

According to the National Association of Realtors report, a seasonally adjusted annual rate of 4.43 million existing homes was sold overall in October, a 5.9% decrease from September, marking the ninth consecutive monthly decline. Sales were down 28.4% yearly from 6.19 million in October 2021.

A seasonally adjusted annual rate of 3.95 million single-family homes was sold in October, a decrease of 6.4% from 4.22 million in September and 28.2% a year earlier. Also, the price of an existing single-family home jumped to $384,900, an increase of 6.2% over the previous year. 

The data further reports that there were 1.22 million housing units available nationwide at the end of October, a 0.8% decrease from September and one year earlier (1.23 million). At the current sales rate, unsold inventory has a 3.3-month supply, which is an increase from 2.4 months and 3.1 months in September.

As prices increased across the board, the median existing-home price for all dwelling types in October rose to $379,100, 6.6% from October 2021 ($355,700). The longest streak in history has been 128 months straight months of year-over-year growth.

Next week’s potential market-moving reports are:

  • Monday, November 28th – No Report
  • Tuesday, November 29th – U.S. Home Price Index, Consumer Confidence Index 
  • Wednesday, November 30th – Job Openings, Quits, Pending Home Sales Index
  • Thursday, December 1st – – Initial and Continuing Jobless Claims, Construction Spending
  • Friday, December 2nd – Unemployment Rate, Average Hourly Earnings

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.