Falling mortgage rates and home prices spur homebuyer interest

Home buyer demand for purchase loans picked up for the fourth week in a row last week as mortgage rates continued to retreat from 2023 highs, according to a survey of lenders by the Mortgage Bankers Association released Wednesday.

The MBA’s Weekly Mortgage Applications Survey shows purchase loan applications were up by a seasonally adjusted 2 percent last week when compared to the week before, but down 35 percent from a year ago. Refinance applications were up 5 percent week-over-week, but down 61 percent from a year ago.

Since hitting 2023 peaks in early March, mortgage rates have been in decline as financial markets digest the probability that turmoil in the banking industry could spark a recession and prompt the Federal Reserve ease up on rate hikes that have been aimed at curbing inflation.

But weakening home prices may also be helping get buyers off the fence, with 19 of the 20 cities tracked by the S&P CoreLogic Case-Schiller Index posting monthly declines in January.

“Home price growth has slowed markedly in many parts of the country, which has helped to improve buyers’ purchasing power,” said MBA Deputy Chief Economist Joel Kan, in a statement. “Purchase applications remain over 30 percent behind last year’s pace, but recent increases, along with data from other sources showing an uptick in home sales, is a welcome development.”

Mortgage rates hit 2023 peak on March 8

The Optimal Blue Mortgage Market Indices, which track daily ups and downs in mortgage rates using rate lock data, show rates on 30-year fixed-rate mortgages hitting a 2023 peak of 6.84 percent on March 8.

Rates on most types of mortgages have come down by roughly half a percentage point since then, although rates on jumbo mortgages that exceed Fannie Mae and Freddie Mac’s conforming loan limits haven’t fallen as far.

Ongoing banking instability “may affect the availability of jumbo mortgages and residential construction loans due to the high concentration of those originations stemming from small and midsized banks,” Fannie Mae economists noted in a March 24 forecast.

For the week ending March 24, the MBA reported average rates for the following types of loans:

• For 30-year fixed-rate conforming mortgages (loan balances of $726,200 or less), rates averaged 6.45 percent, down from 6.48 percent the week before. With points decreasing to 0.62 from 0.66 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased.
• Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $726,200) averaged 6.27 percent, down 6.30 percent the week before. With points decreasing to 0.54 from 0.55 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
• For 30-year fixed-rate FHA mortgages, rates averaged 6.33 percent, up from 6.32 percent the week before. But with points decreasing to 0.93 from 1.07 (including the origination fee) for 80 percent LTV loans, the effective rate decreased.
• Rates for 15-year fixed-rate mortgages averaged 5.84 percent, down from 6.02 percent the week before. With points decreasing to 0.57 from 0.60 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
• For 5/1 adjustable-rate mortgages (ARMs), rates averaged 5.62 percent, up from 5.58 percent the week before. Although points increased to 0.91 from 0.75 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.

Requests to refinance accounted for 29.1 percent of mortgage applications last week, while ARM loan requests accounted for 7.7 percent of total applications. The FHA share of total applications was unchanged at 12.3 percent, while VA share slipped to 11.6 percent.

This article was written by Matt Carter from Inman News and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].