Home purchasing

Rates Are Draining Homebuyers’ Buying Power – theMReport.com

The Mortgage Bankers Association (MBA) reported that mortgage applications for new home purchases fell 13.2% in September 2022 year-over-year, according to data from its latest applications survey. construction (BAS). Month-over-month, builder inquiries were down 7%.

“New home buying activity declined in September as potential buyers retreated in response to rising mortgage rates, heightened concern over a looming recession and a broader slowdown in home price growth. homes,” said Joel Kan, MBA’s vice president and deputy chief economist.

In mid-September, the Federal Reserve, for the third time in a row, raised the nominal interest rate by 75 basis points following their scheduled two-day meeting to a rate of 3.00 to 3, 25%, marking the highest interest rate in 14 years, and fifth increase in 2022.

The MBA estimates that new single-family home sales, which have always been a leading indicator in the US Census Bureau’s new residential sales report, is that new single-family home sales were happening at a seasonally adjusted annual rate of 637,000 units in September 2022, based on BAS data. The new home sales estimate is derived from mortgage application information from the BAS, as well as assumptions about market coverage and other factors.

And as the Fed moved to quell inflation concerns, the 30-year fixed-rate mortgage has risen steadily over the past month, hitting 6.92% last week as it neared the mark. 7%.

The persistence of high rates scares potential buyers away from the market, as increased economic volatility and persistent inflation join the mortgage rate dilemma as another affordability hurdle. Redfin recently reported that pending home sales and new listings both saw even larger annual declines than during the summer, when buyers and sellers initially reacted to rapidly rising rates. Home sales price data, which typically lags other demand indicators by a few months, is also weaker than it was over the summer when the pandemic buying boom of houses has ended. The share of real estate listings with a price drop hit its highest level on record, and the share of homes sold above the final list price fell to its lowest rate since the early days of the pandemic.

“The average 30-year fixed mortgage rate has risen nearly a full percentage point over the past month, significantly reducing the purchasing power of many homebuyers,” Kan added. 18% increase in August during this brief period of declining mortgage rates. »

The seasonally adjusted estimate for September is down 8.9% from August’s pace of 699,000 units. On an unadjusted basis, MBA estimates that there were 52,000 new home sales in September 2022, down 10.3% from 58,000 new home sales in August.

By product type, conventional loans accounted for 69.8% of loan applications, while FHA loans accounted for 18.7%, RHS/USDA loans accounted for 0.3%, and VA loans accounted for 11.2%. The average loan size for new homes fell from $415,594 in August to $406,767 in September.

“The average loan size measured in the survey fell for the fifth straight month — after peaking in April 2022 — at $406,767,” Kan added.