Friday, September 23, 2022

Homebuyers on the Move Again

 The Mortgage Corner


Mortgage rates are on the march again, but so are homebuyers. How long must prospective homebuyers wait when average conforming 30-year fixed rates topped 6.29 percent this week per Freddie Mac and the Fed says they may push up rates even further?

Fixed conforming mortgage rates dropped below 5 percent for the first time in 2009, per the FRED graph that dates back to 1971, yet home buyers kept buying as the economy recovered from the Great Recession and busted housing bubble as well.

They are buying again after the big rise interest rates engineered by the Federal Reserve. Why is it such a surprise?? Rates are still low historically, though home prices have surged in the double digits because of the prolonged decline in interest rates during the pandemic.

One reason for the buying surge? “Most of the country saw modest improvements in homebuyer affordability for the third straight month because of slightly lower mortgage rates amidst steady income gain growth. The healthy labor market continues to be a positive for the housing market, despite ongoing economic uncertainty and high inflation,” said Edward Seiler, MBA's Associate Vice President, Housing Economics. “Higher mortgage rates have reduced borrowers’ purchasing power since the start of the year.”

Both purchase and refinance applications increased in the last week per the Mortgage Bankers Association indexes, up 1 percent and 10 percent, respectively. So-called Jumbo conforming rates were slightly better. For homes sold for over $647,200, the average rate for the 30-year was 5.79 percent. The 15-year rose to 5.56 percent.

The latest existing- home sales rate dropped slightly to 4.8 million annualized, which is actually on a par with average home sales since the Great Recession. It dipped below 4 million during the last two recessions. Whether home buying continues might depend on how much higher interest rates climb.

"The housing sector is the most sensitive to and experiences the most immediate impacts from the Federal Reserve's interest rate policy changes," said NAR Chief Economist Lawrence Yun. "The softness in home sales reflects this year's escalating mortgage rates. Nonetheless, homeowners are doing well with near nonexistent distressed property sales and home prices still higher than a year ago."

So, a housing recession may not be in the cards, just yet.

Harlan Green © 2022

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