Purchase mortgage applications dropped -10% last week as interest rates climbed to 3.83%.

Mortgage Purchase Applications Dropped -10% W/W

Mortgage applications to purchase a home fell -10% last week when compared with the previous week.  Year-over-year, purchase applications were -12%, according to the Mortgage Bankers Association (MBA).

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 With the average loan size hitting a record high of $446,000, it’s safe to assume that most of the home buying activity is taking place on the higher end of the market where there is, compared with other market price points, more supply.

Housing Supply a Huge Factor in Mortgage Demand

According to Reaaltor.com, the total inventory of for-sale homes nationally dropped an eye-popping -28% in January 2022 from the total inventory level in January 2021.

Likewise, new listings dropped -9% on a month-to-month basis.  This was the second consecutive month of declining listings.  Based on the downward direction of new listings, it’s safe to assume that new listings will follow suit in February.

The result?  Buyers can’t buy houses when there are no houses to buy.

Buyer Competition Already in High Gear

For buyers who can find homes to buy, the pace of buying and the competition to buy are already frenetic.

Danielle Hale, Realtor.com’s chief economist, said, “We’re forecasting a whirlwind year ahead for buyers, and, if January housing trends are any indication, 20222 competition is already heating up.  Homes sold at a record-fast January pace, suggesting that buyers are more active than usual for this time of year.”

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Interest Rates Climbing

The average contract interest rate for 30-year fixed mortgages with conforming loan balances of $647,200 or less climbed to 3.83% this last week from 3.78% the week prior.  For loans with a 20% down payment, points decreased from 0.41 including the origination fee to 0.40.  The rate was 87 basis points down from one year ago.

Thanks to Realtor.com, Mortgage Bankers Association and CNBC.

Joel Kan, an associate vice president of economic and industry forecasting with the MBA, said, “Mortgage rates followed the US 10-year yield…as the Federal Reserve …signaled that they (along with other global central banks) will start to remove accommodative policies.”

As interest rates climbed higher, home refinance applications dropped -7% last week and were -52% lower y/y for the same week.  The refinance share of total mortgage activity dropped   -1.1% w/w from 57.3% to 56.2%.

Thanks to CN

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