Low Mortgage Rates Spark a Modest Uptick in Demand

Last week, mortgage rates experienced their most significant one-week drop in over a year, leading to a notable uptick in mortgage demand and a 2.5% increase in total mortgage application volume, according to the Mortgage Bankers Association’s adjusted index. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 7.86% to 7.61%, with points falling from 0.73 to 0.69. This rate drop was attributed to factors such as the U.S. Treasury’s issuance update, a dovish tone in the November Federal Open Market Committee statement, and slower job market data.

The surge in demand was primarily driven by a 2% increase in applications for mortgage refinancing, although they remained 7% lower than a year ago. While rates are relatively stable, homeowners have less incentive to refinance, as many did two years ago when rates were exceptionally low. Applications for purchasing a new home increased by 3% for the week but were still 20% lower than the previous year. The ongoing rise in home prices, driven by limited housing supply, continues to offset the impact of declining interest rates on homebuyers. Despite starting the week with slightly higher rates, the upcoming week is expected to have fewer economic events that would influence mortgage rates, following a week where the Federal Reserve maintained interest rates and a lower-than-expected employment report prompted a significant rate decrease.

Is the Housing Market Recession Ending?

In 2023, the U.S. housing market has seen a disparity between home prices, which have remained stable, and a significant drop in sales volume. The industry’s concern revolves around transaction volume rather than property prices, indicating a housing recession. The crucial question is whether a potential improvement in mortgage rates could mark the end of this recession or if the ongoing lack of affordable housing will lead to a continued decline in homebuyers. An increase in inventory, which is uncommon for November due to seasonal trends, suggests that the market may have reached its peak. Mortgage rates will play a pivotal role in influencing inventory levels for the upcoming year.

Additionally, despite supply constraints, the number of sellers has remained steady, and transaction volume is no longer decreasing year-over-year. Nearly 39.2% of homes on the market have experienced price cuts, indicating a more stable market than the fourth quarter of 2022. Home prices have remained strong, staying 2% above the previous year, with the median price for single-family homes now at $430,000.

To sum up, the housing market is experiencing a recession in transaction volume while maintaining stable home prices. The direction of mortgage rates will play a critical role in determining the market’s trajectory for the coming year, and the data suggests a potential stabilization in the market as supply constraints persist.

CoreLogic Home Price Index Surges, Biggest Jump Since February

According to CoreLogic’s Home Price Index report, single-family home prices in the U.S. experienced a 4.5% year-over-year increase in September, the most significant annual gain since February. This substantial jump is partly attributed to the recent upward trend in home prices, driven by limited resale inventory. However, it’s important to note that September’s year-over-year increase is somewhat inflated due to the lower prices observed the previous year.

The Northeast emerged as the region with the most robust annual price growth, with Maine leading all states with a 10.1% year-over-year appreciation. In contrast, several Western states, including Idaho, Utah, Montana, Wyoming, and the District of Columbia, witnessed year-over-year home price depreciation. Among large cities, Miami experienced the highest annual appreciation at 8.5%, followed by St. Louis, Charlotte, and Detroit. CoreLogic predicts 0.1% month-over-month price growth in October and anticipates a slowdown in annual price gains to 2.6% by September 2024.

Source:

Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.