A home for sale sign is pictured in the Alhambra, California on May 4, 2022.
Frederick J. Brown | AFP | Getty Images
Mortgage rates actually fell slightly last week, but damage has already been done to housing affordability. Demand for refinancing and purchase loans declined, reducing the total volume of mortgage applications by 11% for the week, according to the seasonally adjusted index of the Association of Mortgage Bankers.
Mortgage applications for the purchase of housing decreased by 12% from week to week and are 15% lower than the same week a year ago. This was the first weekly decline in demand for home buyers since the third week of April. Mortgage rates have risen by more than 2 full percentage points since the beginning of the year, and house prices have risen by more than 20% over the previous year.
The average agreed interest rate for 30-year fixed-rate mortgages with corresponding loan balances ($ 647,200 or less) decreased to 5.49% from 5.53%, points increased to 0.74 from 0.73 (including the grant fee) for loans with a 20% reduction.
Inflation also does not help consumers to feel particularly red.
“The general uncertainty about the short-term economic outlook, as well as the recent instability of the stock market, may cause some households to slow down the search for a home,” said Joel Kahn, an MBA economist.
Applications for housing loan refinancing continued to increase, falling by another 10% week on week. Demand for refinancing was 76% lower than a week ago. Two years of record low interest rates during the Covid pandemic sparked a refinancing boom that has now disintegrated. There is simply a very small set of borrowers who can now benefit from refinancing.
Although it fell very slightly compared to the previous week, the share of interest-bearing mortgages on total applications remained high at 10.5%. At the beginning of this year it was about 3%. ARMs offer lower interest rates and can be fixed for up to 10 years.
Mortgage rates rose again on Tuesday, following strong retail data and comments from Federal Reserve Chairman Jerome Powell, who said the Fed would not hesitate to continue raising interest rates until inflation falls.
The weekly decline in mortgage demand from home buyers is in line with another report released Tuesday by local home builders. They report a significant decline in both buyer traffic and current sales conditions, according to the National Association of Home Builders. The mood of the builders fell to its lowest level in nearly two years.
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