Refinance demand has now plummeted to the lowest level since 2019.
Total Mortgage Demand Dropped -41% Year-over-Year
According to the Mortgage Bankers Association, refinance demand dropped -10% week-over-week this last week. Refinance demand has plummeted a whopping -62% year-over-year.
In the meanwhile, demand for mortgage purchase applications fell -3% week-over-week. Purchase applications have dropped -9% year-over-year.
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Together, total mortgage demand has nosedived -41% year-over-year.
FHA loans, popular with the majority of first-time buyers because of lower down payment requirements, “…are dropping like flies,” said CNBC’s Diane Olick. Within one week, FHA purchase loans dropped -7.9%, according to the MBA.
Joel Kan, MBA forecaster said, “…first-time buyers (are) being disproportionately impacted by supply and affordability challenges.”
Interest Rates Hit 5.02%
Mortgage News Daily (MND) confirmed on April 6 that interest rates reached 5.02% on the popular 30-year fixed-rate home mortgage.
MND commented that crossing this interest rate threshold of 5.02% is a financial as well as emotional jolt. Not only does the monthly price of homeownership become more costly, many potential buyers who qualified for a loan last week when rates increased from 4.8% to 4.9% will now, with rates at 5.02%, not qualify for a home loan at all.
Home Prices Now +20% Higher Year-over-Year
CoreLogic reported this week that its Home Price Index is up +20% y/y.
For those still able qualify for a home loan, the average loan size hit $452,600 the week of April 4.
Will Home Prices Ever Go Down?
Scant inventory, the curse of this imbalanced housing market and major cause of escalating home prices, remains scant. There may, however, be a relief to this historic shortage of inventory as approximately 64% of prospective home sellers, according to a just released housing report from Realtor.com, plan to sell their homes within the coming 10 months. (See our post “Prediction – Major Uptick in Seller Activity” in this week’s news calendar.)
Consider also CNBC’s Diane Olick’s comments about a timeline for cooling home prices. Olick told SquawkBox that home prices generally lag sales by six months and that pending sales prices generally lag closed sales by four months.
New construction is increasing supply right now but prices for newly constructed homes remain up due to the usuals…land costs, labor shortages and exorbitantly high material costs as well as “time is only money” supply delays.
Sifting through all of these considerations when trying to foretell a timeline for lower home prices is the reality we mentioned earlier in this piece…5.02% interest rates are now that reality. This 5.02% reality means that many potential buyers can no longer qualify for a loan. If buyers can’t qualify, they can’t buy. If buyers can’t buy, there will be fewer sales. If there are fewer sales, then, perhaps, home prices will cool?
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Thanks to CNBC.