Housing Beat: Mortgage Rates Continue to Rise as Inventory Levels Slowly Rise

More homebuyers took out mortgages despite rising rates, while tight housing inventory shows signs of improvement. Nevertheless, many buyers are not optimistic about the near future of the housing market.

On the Frontline of Buying a Home: Freddie Mac FMCC reported that the 30-year fixed-rate mortgage averaged 5.30% as of May 12, up from last week when it averaged 5.27% – a year ago at this time, it averaged 2.94%. The 15-year fixed rate mortgage averaged 4.48%, down from last week when it averaged 4.52% – it averaged 2.26% a year earlier . And the 5-year Treasury-indexed hybrid variable rate mortgage averaged 3.98%, up from last week when it averaged 3.96% and up from the last year when it averaged 2.59%.

“Homebuyers continue to show resilience even as rising mortgage rates push monthly payments up about a third from a year ago,” said Sam Khater, chief economist at Freddie Mac. “Several factors are contributing to this momentum, including the great wave of first-time buyers looking to realize their dream of home ownership. In the coming months, we expect monetary policy and inflation to discourage many consumers, weaken purchasing demand and slow house price growth.

The resilience of homebuyers has shown itself in the purchase market – the Mortgage Bankers Association (MBA) The market’s composite index, a measure of mortgage application volume, rose 2% and its buy index rose 5%, while its refinance index fell 2%. The refinancing share of mortgage activity fell to 32.4% of total applications, from 33.9% the previous week.

“Rapidly rising mortgage rates continue to plague the refinance market, with activity 70% lower than a year ago. Most homeowners have refinanced at lower rates over the past two years,” said Joel Can, associate vice president of MBA economic and industrial forecasting. “Despite a slow start to the home buying season in the spring of this year, potential buyers are showing some resilience in the face of higher rates. Buying activity has now increased for two consecutive weeks.

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As buying activity surged, the share of home sellers lowering their asking price hit a six-month high of 15% for the four weeks ending May 1, according to data released by red fin RDFN. That percentage was up from 9% a year ago and was the largest annual gain since Redfin started tracking the data in 2015.

However, demand always exceeds supply and even low-priced homes are acquired as quickly as they come on the market.

“Homebuyers continue to be pressured in almost every way possible, causing some to take a step back from the market,” said Redfin’s chief economist. Daryl Fairweather. “Unfortunately for buyers hoping to strike a deal as competition cools, sellers are pulling back even faster, keeping the market deep in seller’s territory. So even though price cuts are becoming more common , most homes still sell above asking price and in record time.

On the door-to-door sales front: But there could be good news on the way – new data from Realtor.com showed a 12.2% drop in active listings in April, marking the smallest one-year drop on the other since December 2019.

“April data suggests that a positive turn of events is on the horizon for weary shoppers: if the trends we are currently seeing continue, we could potentially see year-over-year inventory growth. another over the next few weeks,” said Danielle Hale, chief economist for Realtor.com. “As homebuyers still seek relief from record asking prices and historically low supply, compared to the past two years of annual double-digit inventory declines, an impending rebound is welcome news – a refresh from real estate, if you will.”

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Nevertheless, home buyers are not particularly optimistic about the improvement in the environment.

At Fannie Mae’s FNMA April’s Home Buying Sentiment Index fell 4.7 points to 68.5, its lowest level since May 2020, with consumers surveyed citing minimal levels of housing affordability and rising mortgage rates for their sluggishness. All six components of the index were down month over month, with 76% of consumers saying they think now is not a good time to buy a home and 73% of respondents expecting year-over-year mortgage rate hikes – both percentages were record highs for the survey. .

“Furthermore, consumer perception of the ease of obtaining a mortgage has also declined across nearly all segments surveyed this month, suggesting to us that the benefit of the historically low mortgage rate environment of the recent past appears to have diminished, and affordability is poised to become an even bigger constraint in the future,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “This sentiment is consistent with our forecast for home sales to decelerate through the remainder of 2022 and into 2023.”

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