The demand for mortgage is rising as high rates do not discourage prospective homebuyers for making mortgage applications.
Mortgage demand has risen for the second consecutive week despite some volatility in mortgage interest rates. However, although applications to purchase a home climbed 7% this week, the figure is still 38% down from the same week a year ago. Meanwhile, the Mortgage Bankers Association’s index revealed that the total mortgage application volume increased 6.5% last week compared to the previous week.
Applications to refinance a home loan rose 5% for the week amid the development of mortgage demand and interest rates. However, these refinancing applications also represented a massive 74% drawdown from the same week one year ago.
The average 30-year fixed contract interest rate mortgage, with conforming loan balances of $726,200 or less, decreased from 6.79% to 6.71%. In addition to this decrease, points for loans with a 20% down payment dipped from 0.80 to 0.79, including the origination fee.
It is worth pointing out that mortgage rates were predominantly higher all week before declining sharply last Friday. The reason for the downturn was due to unsavory news regarding the failure of Santa Clara-based Silicon Valley Bank (SVB).
Mortgage applications also previously dried up in early February after rates climbed a whole percentage point. However, home buying is in ascension again, likely due to buyer concern that rates could steepen further. Real estate consultant John Burns described the steady rise in home buying in February, amid surging interest rates, as typical. In his own words, “That always happens when rates surge, and it only lasts a few weeks.”
Homebuilding Giant Posts Welcome Results amid Mortgage Demand & Volatile Rates Development
Prominent home construction company Lennar Corp (NYSE: LEN) recently posted better-than-anticipated results in its latest earnings release. Weighing in on the welcome development on Tuesday, the Miami-based company’s chairman, Stuart Miller, explained in a release:
“Home buyers are considering the possibility that today’s interest rate environment may be the new normal. Accordingly, the housing market continues shifting as growing household and family formation continued to drive demand against a chronic supply shortage.”
On how the first three months of 2023 unraveled for Lennar, Miller added:
“During the quarter, we saw a generally strong economy at the intersection of high inflation and strong employment numbers, while the housing market continued down a winding road of trying to find its footing.”
According to the CEO, interest rates and sticker shock constrained sales activity in December. Miller further explained that lower interest rates in January and early February energized sales.
Rates Rose 7% amid Surging Inflation in Early March
In early March, mortgage rates rose more than 7% for the first time since October amid surging inflation. At the time, Mortgage News Daily reported a 7.1% jump in the 30-year fixed mortgage average rate. Furthermore, the inflation-induced mortgage rate upswing also satisfied a familiar pattern of mortgage rates loosely following the 10-year Treasury yield.
Traders could be skeptical about aggressively reducing rates until they are convinced of substantially lower inflation. Meanwhile, the Fed appears set to hike interest rates again at its upcoming fiscal meeting.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
