Here’s a visual illustration of what is happening (and why) in the for-sale existing home market across the country.
3 Years in the Life of a $300,000 House
Year Price 30-year Fixed Rate Monthly Payment
2019 $300,000 4.33% $1,192
2020 $315,000 3.41% $1.119
2021 $362,250 3.15% $1,245
2022 $438,322 5.5% $1,991
(Mortgage payments do not include taxes and insurance.)
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Mortgage Demand Slides Even as Rates Pull Back
Last week, mortgage interest rates dropped to 5.49% from 5.49% with points decreasing to 0.60 from 0.74 (including origination fees) on loans with a 20% down payment.
Even with this slight drop in rates, applications for purchase mortgages were flat w/w. For the year, however, purchase applications dropped -16% y/y, according to the Mortgage Bankers Association.
Refinance applications continued spiraling downward. Refi applications dropped -2% w/w and were down -75% y/y.
Joel Kan, the MBA’s associate vice president of economic and industry forecasting said, “Most refinance borrowers continue to remain on the sidelines as a result, and refinance applications have fallen in nine of the past 10 weeks. Compared to January 2022, refinance activity is down -66%.”
Mortgage Demand Now Close to Lows of Spring 2020
The onslaught of the COVID pandemic essentially shut down the housing market in the Spring of 2020. Mortgage demand from homebuyers collapsed to unprecedented lows…and now, due to the combination of climbing interest rates and relentlessly increasing home price growth, current mortgage demand is close those lows of Spring 2020.
Potential homebuyers, particularly first-time homebuyers, are jumping onto the sidelines of the housing market rather than into for-sale homes due to high prices and substantially higher monthly mortgage payments.
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Thanks to the Mortgage Bankers Association and CNBC.