Mortgage Demand for Home Buyers Goes Down Even With Lower Prices “

    Economic uncertainty and stock market volatility may have helped drive a 12 percent drop in mortgage applications.

    Homebuyer demand for purchase loans fell last week for the first time in three weeks, even as mortgage rates eased from their highest levels in 2022, according to a weekly survey of lenders by the Mortgage Bankers Association.

    Joel Kan

    “Requisitions fell 12 percent last week, as potential homebuyers were put off by higher rates and deteriorating affordability conditions,” MBA expert Joel Kahn said in a statement. “Furthermore, general uncertainty about the near-term economic outlook, as well as recent volatility in the stock market, may cause some families to delay their home search.”

    The MBA survey showed that the demand for purchase loans was down 15 percent from a year ago. Although stable in recent days, mortgage rates are more than two percentage points higher than they were a year ago, and are hovering around levels not seen since 2009.

    The survey found that rising rates had significantly dampened homeowners’ appetite for refinancing, with requests for refinancing down 10 percent on a weekly basis, and 76 percent from a year ago.

    Mortgage rates fell slightly last week, after the Federal Reserve outlined plans for a cautious approach in cutting back more than $2.7 trillion of mortgage-backed securities the central bank has purchased in recent years to help keep rates low.

    After rising more than two full percentage points this year — from 3.409 percent on January 3 to a 2022 peak of 5.593 percent on May 6 — interest rates on 30-year fixed-rate mortgages have fallen 11 basis points, to 5.479 percent as of Tuesday, according to Blue Optimum Mortgage Market Indicators (OBMMI).

    Mortgage rates are off the level

    For the week ending May 13, MBAs reported average rates for the following types of loans:

    For 30-year fixed-rate compliant mortgages (with loan balances of $647,200 or less), rates averaged 5.49 percent, down from 5.53 percent the previous week. Although the score increased to 0.74 from 0.73 (including origination fees) for loans at 80 percent of the loan-to-value (LTV) ratio, the actual rate also decreased.

    Jumbo 30-year fixed-rate mortgage rates (loan balances greater than $647,200) averaged 5.03 percent, down from 5.08 percent the previous week. But as the points increased to 0.61 from 0.42 (including creation fees) for long-term loans of 80 percent, the effective rate increased.

    For 30-year fixed-rate mortgages, rates averaged 5.32 percent, down from 5.37 percent the previous week. With the score dropping to 0.71 from 0.87 (including creation fees) for long-term loans of 80 percent, the effective rate has also fallen.

    Average rates for 15-year fixed-rate mortgages, which are popular with homeowners, were 4.73 percent, down from 4.79 percent the previous week. With the points dropping to 0.82 from 0.80 (including creation fees) for long-term loans of 80 percent, the effective rate has also fallen.

    For 5/1 adjustable rate mortgages (ARM), interest rates averaged 4.42 percent, down from 4.47 percent the previous week. With unchanged points at 0.73 (including creation fees) for 80 percent long-term loans, the effective rate also declined.

    The Federal Reserve has raised short-term interest rates twice this year — by 0.25 percentage points in March and 0.50 percentage points in May — the first time it has implemented a 50 basis point rate hike in 22 years.

    Federal Reserve Chairman Jerome Powell said a half-point rate hike is likely at each of the next two Federal Open Market Committee meetings in June and July, but those decisions will depend on the latest data.

    Get the Inman Extra Credit newsletter straight to your inbox. A weekly roundup of the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

    Send an email to Matt Carter