Staff Reports
Last week, mortgage demand dipped as potential homebuyers backed away from the housing market due to rising mortgage rates. The Mortgage Bankers Association’s report on Wednesday revealed a 10.6% decrease in mortgage loan application volume compared to the previous week, and refinances plummeted by 11%. Yikes! It seems like folks are feeling the pinch of higher rates.
Mortgage demand tanks as mortgage rates rise past 7% again https://t.co/Z58vWbuxMk https://t.co/Z58vWbuxMk
— Washington Examiner (@dcexaminer) February 22, 2024
These dropping numbers can be traced back to the surge in mortgage rates, with the average rate on a 30-year fixed-rate mortgage soaring to a whopping 7.11%. That’s up from a recent low of about 6.65% in December. Mike Fratantoni, the MBA’s senior vice president and chief economist, pointed out that the higher rates and home values are putting the squeeze on potential homebuyers. Ouch! People’s wallets must be feeling the heat.
The housing market has been on a rollercoaster ride for almost two years, ever since the Federal Reserve started hiking interest rates. And now, mortgage rates are at their highest point since way back before the Great Recession, reaching levels not seen since the turn of the century. Talk about a blast from the past!
Mortgage rates had briefly dipped after investors got hopeful about the Fed cutting rates, but that happy trend has taken a detour. Some pesky inflation reports and economic indicators have shown that the economy is holding strong, and inflation isn’t budging as easily as expected. This has upped the chances that the central bank will keep interest rates on the up and up for a while longer. For homebuyers, this means bad news bears.
As mortgage rates climb, the demand for people wanting to buy homes typically takes a nosedive. It’s like trying to sell ice cream during a blizzard — really tough! Plus, things went even more bonkers during the pandemic when interest rates were slashed to nearly zero. Mortgage rates stayed at rock-bottom lows below 3%, causing a frenzy of home purchases and refinances. But now, with rates skyrocketing, homeowners who locked in those super low rates are holding onto their properties, leading to a shortage of homes for sale and putting the pressure on the new homes market. Phew, what a rollercoaster!
In December, existing home sales hit their lowest level in over a decade, dropping by 1% to a seasonally adjusted annual rate of 3.78 million. It’s like the housing market hit a speed bump and then crashed into a pothole. Meanwhile, new home sales soared by 8% from November to December, reaching a seasonally adjusted annual rate of 664,000. It looks like the shortage of existing homes is pushing buyers toward newly built units. With fewer options available, it’s no wonder the demand is shifting!
Well, it seems like the housing market is going through some wild swings, and with mortgage rates on the rise, it’s definitely creating some challenges for potential homebuyers. As they say, hold onto your hats, folks — it’s going to be a bumpy ride!
