Real estate market stumbles again: decline in mortgage applications

With interest rates continuing to rise, the housing market continues to suffer.

Mortgage applications fell 8.3% in the week ended April 22 from the previous week, reaching the lowest level in more than three years, according to the Mortgage Bankers Association (MBA).

Refinance requests fell 9% from the previous week and 71% from a year ago, the lowest level since December 2018. Purchase requests fell 8% from a week ago and 17% from a year ago, the lowest level in nearly two years. .

“With mortgage rates rising last week to their highest level since 2009, applications have continued to decline,” MBA economist Joel Kan said in a statement.

The average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) rose to 5.37% last week from 5.2% the previous week. The rate has jumped more than 2 percentage points so far this year.

“The decline in purchase requests was evident across all loan types,” Kan said. Potential buyers have retreated this spring as they continue to face limited options of homes for sale as well as higher costs due to rising mortgage rates and prices.

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Outlook is not promising

Looking ahead, “the recent decline in purchase requests is an indication of potential weakness in home sales in the months ahead,” he said.

Homebuyers continue to migrate to adjustable rate mortgages (ARMs) to “mitigate higher monthly payments,” Kan said. ARMs typically start out with lower rates than fixed mortgages, and sometimes their rates are fixed for the first five, seven, or 10 years of the mortgage. The danger, of course, is that ARM rates can skyrocket later in the mortgage term.

In any case, RMAs accounted for 9% of requests last week in terms of volume, double the total from three months ago. This also coincides with a 1.5 percentage point increase in the 30-year fixed rate.

Meanwhile, a survey of landlords and renters showed that 40% see cryptocurrencies as a better investment than a house. Additionally, 50% of respondents think stocks are a better investment than a home, according to the report published by ConsumerAffairs, a guide to consumer finance.

Among homebuyers, 44% said they spent more than they had planned on the home, according to the survey. The average overrun was $10,334. On the bright side, 73% of homeowners said owning a home boosted their self-esteem.