A sign “for sale” outside a home in Albany, California, on Tuesday, May 31, 2022. Home buyers face a deteriorating affordability situation with mortgage rates hovering around the highest levels in more than a decade.
David Paul Morris | Bloomberg | Getty Images
The total volume of mortgage applications last week fell 52.7% compared to the same week a year ago, according to the seasonally adjusted Mortgage Bankers Association index. A sharp rise in interest rates is dampening the volume of refinancing, and those rates, along with extremely high home prices and a shortage of homes for sale, are hurting demand from potential buyers.
Last week, the average contract interest rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) increased to 5.65% from 5.40%, with points rising to 0.71 from 0.60 (including creation fees) For loans with 20% down payment. This week they jumped higher, with an average rate hit 6.28% on Tuesday, according to a daily metric from Mortgage News Daily.
“Mortgage rates followed higher Treasury yields in response to higher-than-expected inflation and a prediction that the Fed would need to raise interest rates at a faster pace,” said Joel Kahn, MBA economist.
Weekly mortgage application volume rebounded slightly compared to the previous holiday-adjusted week. Refinancing demand rose 4% during the week but was down 76% from the same week a year ago.
Mortgage applications from homebuyers increased 8% during the week but were 16% lower than a year ago.
“Despite the price increase, app activity rebounded after the Memorial Day holiday week but remained 0.29 percent below pre-holiday levels,” Kahn added.
The housing market is now reeling in an environment of high interest rates. After two years of record low rates, it is fueled by the Federal Reserve corona virus disease pandemicInduced purchases of mortgage-backed securities, home prices too high and affordability is now in the basement. major real estate brokerage firms, Redfin And the compassAnd the Both announced layoffs on Tuesday.
“Mortgage rates have gone up faster than at any time in history. We may be facing years, not months, of declining home sales, and Redfin still plans to thrive. If the drop from $97 per share to $8 doesn’t put the company in a tailspin,” he wrote, Glenn Kellman, CEO of Redfin, on the company’s website.
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