Lower Mortgage Rates Urge Buyers To Reenter The Market

The housing market stalled last year as mortgage rates increased. Homes began receiving fewer offers and stayed on the market for a long time. As a result, some homeowners opted to delay their selling.

But as interest rates start to decline, buyers are again entering the market. In fact, according to the most recent data from the Mortgage Bankers Association (MBA), mortgage applications rose 7% last week over the previous week.

So, if you’ve been wanting to sell your home but are still determining whether anyone will buy it, this market move might be your chance. Here are the opinions of experts on the topic of buyers returning to the market as spring approaches.

Mike Fratantoni, SVP and Chief Economist, MBA:

“Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall. As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”

Lawrence Yun, Chief Economist, National Association of Realtors (NAR):

“The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”

Thomas LaSalvia, Senior Economist, Moody’s Analytics:

“We expect the labor market to remain robust, wages to continue to rise—maybe not at the pace that they did during the pandemic, but that will open up some opportunity for folks to enter homeownership as interest rates stabilize a bit.”

Sam Khater, Chief Economist, Freddie Mac:

“Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of Millennial renters will provide support to the purchase market.”

Case-Shiller Index Posts Annual Deceleration for 7th Month in a Row

As U.S. home prices continued to decline towards the end of 2022, the CoreLogic S&P Case-Shiller Index reported a 7.7% annualized increase in November, down from a 9.2% increase in October. With the 10-city composite index registering a 6.35% yearly gain (down from 8% in October) and the 20-city composite logging a 6.8% gain (down from 8.6% in October), price growth in large cities continued to slow down. With the most recent drop making November’s annual increase the smallest gain since September 2020, year-over-year home price growth has slowed for seven years straight.

S&P DJI managing director Craig J. Lazzara observed that the national index had fallen 3.6% since reaching its top in June 2022. The year-over-year gains for each of the 20 cities the index track decreased from October to November, underscoring the market’s continued cooling. San Francisco saw its first negative yearly growth in home prices since October 2019, with a 1.6% drop from October 2021.

The index is still strong by historical standards despite the recent decline. The national index’s 7.7% annual growth over the previous year is still in the 74th percentile of performance levels throughout history.

Mortgage Demand Dropped Significantly Last Week Despite Further Drops in Interest Rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) dropped from 6.20% to 6.19%, with points for loans with a 20% down payment falling from 0.69 to 0.65 (including the origination fee). In the same week a year earlier, the rate was 3.78%.

Applications to refinance a mortgage declined 7% for the week. There are still very few borrowers who can profit from a refinance at today’s rates. Thus demand is currently reducing once more. Homeowners may have rebounded quickly after the Christmas lull, driving up the market over January.

Mortgage applications for home purchases decreased by 10% weekly and 41% annually. The number of homes for sale is still limited, which may keep mortgage demand under pressure even while home prices and mortgage rates are progressively down.

“Purchase activity is expected to pick up as the spring homebuying season gets underway, bolstered by lower rates and moderating home-price growth,” said Joel Kan, an MBA economist. “Both trends will help some buyers regain purchasing power.”

For the past few days, mortgage rates have been fluctuating within a small range, but this might all change based on the remarks the Federal Reserve chairman is anticipating making Wednesday. Although it is anticipated that the central bank will increase its interest rate, mortgage rates are not necessarily affected. Depending on what it says about the status of the economy, the recession, and inflation, Friday’s monthly employment report may significantly change rates.

Source:

Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.