‘No sign of a rebound’: Mortgage applications hit 22-year lows, as home buyers pull back

Discussion in 'Wall St. News' started by gwb-trading, Sep 8, 2022.

  1. gwb-trading


    ‘No sign of a rebound’: Mortgage applications hit 22-year lows, as home buyers pull back
    Mortgage loan applications fell again this week, the Mortgage Bankers Association said, as fewer people are purchasing homes, or refinancing their loans

    The numbers: As mortgage rates head towards 6%, would-be home buyers continue to stay on the sidelines, putting off purchases and refinances.

    Weak demand from buyers is reflected in the Market Composite Index, a measure of mortgage application volume. The index is at its lowest level in 22 years, the Mortgage Bankers Association (MBA) said on Wednesday.

    The market index fell 0.8% to 258.1 in the week ending Sept. 2. One year ago, the index stood at 705.6.

    The big picture: Rates and home prices show no signs of falling sharply in the near-term, so buyers are choosing to wait. That means the downturn in housing is likely to persist.

    Some sellers and builders are so put off by the fall in buyer demand that they’re pivoting to the rental market.

    But amidst all this gloominess, things are likely to turn around soon, the MBA said.

    “Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand,” Mike Fratantoni, senior vice president and chief economist at the MBA, said in a statement.

    In other words, rates aren’t likely to fall significantly, but a better job market translates to higher wages, which means people can afford more. Plus, the inventory of homes is also increasing. That’ll lead to an “eventual increase in purchase activity,” Fratantoni said.

    But for now, there’s “no sign of a rebound in purchase applications yet,” he added.

    Key details: The Refinance Index dropped by 1.1% and was down 83% compared to a year ago.

    The Purchase Index — which measures mortgage applications for the purchase of a home — fell by 0.7% from the previous week.

    The average contract rate for a 30-year mortgage for homes sold for $647,200 was 5.94% for the week ending Sept. 2. That’s up from 5.8% the week before, the MBA said.

    For homes sold for over $647,200, the average rate for the 30-year was 5.46%. The 15-year rose to 5.23%.

    The rate for adjustable-rate mortgages, which comprise 8.5% of total applications, rose to 4.81%.

    What are they saying? Home purchase applications are down by 40% in August, compared to January of this year, Sam Hall at Capital Economics wrote in a note.

    Hall expects demand to fall further in the coming months as rates will rise above 6%.

    Market reaction: The yield on the 10-year Treasury note TMUBMUSD10Y, 3.219% fell to 3.31% in early morning trading.
  2. VicBee


    From a common sense reaction, it seems expected that far fewer people are going to buy a home now with such high interest rates. If rates remain they won't have a choice if they must buy, but that's many months down the road.
    People with properties aren't going to sell now as prices drop, but those on variable rates are under pressure and will be first to sell and lose out.

    Nothing unusual in any of this and it's long overdue. Prices have been ridiculous for years.
    wrbtrader and TrailerParkTed like this.
  3. tango29


    I get the idea of all things are relative, but the reality is at least going back to 1971 the rates today are still quite a bit below the long-term average. Then again if you have been only looking since ~ 2010 on it seems like they are going back to high rates. If I remember correctly my Dad said their first mortgage back in the 50's 60's was about 6%. Our first mortgage was 7.125% in 1993, and that was at a low at the time.
  4. VicBee


    Ycharts.com: Historically, the 30-year mortgage rate reached upwards of 18.6% in 1981 and went as low as 3.3% in 2012. 30 Year Mortgage Rate is at 5.66%, compared to 5.55% last week and 2.87% last year. This is lower than the long term average of 7.76%.
    wrbtrader likes this.
  5. Pekelo


    Another thing that has fueled the housing prices was the housing market not keeping up with population growth. That won't change anytime soon.

    The numbers:

    "The U.S. is short 5.24 million homes, an increase of 1.4 million from the 2019 gap of 3.84 million, according to new research from Realtor.com. The U.S. Census found that 12.3 million American households were formed from January 2012 to June 2021, but just 7 million new single-family homes were built during that time."
    wrbtrader likes this.
  6. Mortgage rates in the early '80s were >15%
  7. RedDuke


    If rates stay high house prices will correct as they always do, it just takes time before sellers accept new reality. Prolonged buyers market is coming.
    VicBee and vanzandt like this.
  8. vanzandt


    Yeah typically it takes at least 8 months to see prices start to drop on higher rates.
    This time may be longer however.
    Per sqf costs of new construction haven't budged.
    The whole labor thing.... even though lumber has come down.
    A lot of dust is gonna have to settle this time around.
    If there is perhaps any silver-lining to this record influx of illegals, that perhaps would be it, builders might be able to get some halfway decent help that actually show up for work... and actually work.
  9. Handle123


    Am waiting till next year to buy home in Washington State, am seeing houses already coming down. Some of it are house flippers don't want to be paying mortgages each month.
  10. Washington state....that's where I'm currently browsing homes for sale. https://www.zillow.com/homes/Washington_rb/
    Been so casually, for the past couple or three years or so.
    No state income taxes. One of the nine states that doesn't impose income taxes.

    I'll buy any home as long as it's not on a Cul-de-Sac neighborhood, or Dead End road, or No Outlet neighborhood.
    That trapped, backed up, energy is not good energy flow. You want Positive Feng Shui.

    An easy way to not worry about rising Mortgage rates....is to buy the home entirely in full cash -- no loan required.
    Last edited: Sep 8, 2022
    #10     Sep 8, 2022