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The demand for mortgages is now about half of what it was a year ago, as interest rates move even higher

A “For Sale” sign outside a home in Albany, California, on Tuesday, May 31, 2022. Homebuyers are facing a worsening reasonableness situation with mortgage rates hovering around the highest levels in more than a decade.

David Paul Morris | Bloomberg | Getty pictures

The total mortgage application volume was 52.7% lower last week than the same week a year ago, according to the Mortgage Association̵[ads1]7;s seasonally adjusted index. Sharply rising interest rates are decimating the refinancing volume, and these interest rates, together with sky-high house prices and a lack of homes for sale, are meeting the demand from potential buyers.

Last week, the average contract rate for 30-year fixed-rate mortgages with a corresponding loan balance ($ 647,200 or less) increased to 5.65% from 5.40%, with points up to 0.71 from 0.60 (including the set-up fee) for loans with a 20% down payment. This week, they rose even higher, with the average interest rate at 6.28% on Tuesday, according to a daily target from Mortgage News Daily.

“Mortgage rates followed government rates in response to higher-than-expected inflation and the expectation that the Federal Reserve will need to raise interest rates at a faster pace,” said Joel Kan, an MBA economist.

The weekly loan application volume increased slightly compared with the previous holiday-adjusted week. Refinancing demand rose 4% for the week, but was 76% lower than the same week a year ago.

Mortgage applications from home buyers rose 8% for the week, but were 16% lower than a year ago.

“Despite rising prices, application activity recovered after Memorial Day holiday week, but remained 0.29 percent below pre-holiday levels,” Kan said.

The housing market is now raging in a rising interest rate environment. After two years of record low prices, driven by the Federal Reserve’s Covid pandemic-induced purchase of mortgage-backed bonds, house prices are overheated and affordability is now in the basement. Major real estate agents, Redfin and Compass, both announced layoffs on Tuesday.

“Mortgage rates rose faster than at any time in history. We could face years, not months, with fewer home sales, and Redfin continues to thrive. If falling from $ 97 per share to $ 8 does not put a company through heck, I do not know what who does it “, wrote Redfin CEO Glenn Kelman on the company’s website.

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