Mortgage Demand Jumps 28%
The demand for mortgage rates has risen a seasonally adjusted 28% for the week ending January 13th. A drop in mortgage rates across the board is driving demand for both house purchases and refinancing.
The Federal Reserve has been taking aggressive action to get control of inflation. This resulted in seven rate hikes in 2022, creating upward pressure on rates. We saw a steep run up in rates through 2022 but now they are retreating from their peak last autumn.
It was good news for buyers and homeowners alike in mid January as a dip in mortgage rates provided them an opportunity to purchase or refinance. This trend may well continue with mortgage rates at their lowest level since September 2022 and expected to come down further. This was their third straight week of decline.
With the spring buying season on the way, the lower mortgage rates and the anticipated increased number (amount) of homes on the market, could all help first-time homebuyers. Many have been waiting on the sidelines as they look for affordability to improve.
Susan Devaney (CEO - Mavins Group) stated, “As the expected spring seasonal increase in homes on the market unfolds, more buyers will feel comfortable to actively. house hunt again.”
Key Mortgage Numbers - Week Ending Jan 13th
The market composite index (a measure of mortgage application volume) rose 27.9%
The refinancing index jumped 34.2%
The purchase index (a measure mortgage applications for home purchase) rose 24.7%
The average contract rate for a 30 year mortgage for homes sold for $726,000 or less was 6.23% in the week ending January 13th. That figure is down from 6.42% for the prior week.
For homes sold over $726,000, the average rate for the 30 year mortgage was 6.08% while the 15-year fell to 5.58%. The figure for adjustable rate mortgages fell to 5.31%.
House Affordability Trends
The average family income for 2022 was $90,000 according to the US Department of Housing and Urban Development. The average price of an existing home sold in December 2022 was $366,900 according to the National Association of Realtors.
Assuming a 20% down payment and a mortgage rate of 6.42%, the monthly payment of $1,840 is equal to 25% of the average family income. A year ago the income figure stood at $79,900 and the average home price was $364,600. With the mortgage rate at 3.4%, buying the average home required 19% of the family’s monthly income.
Where Do Mortgage Rates Go From Here?
Mortgage experts like Lawrence Yun at the National Association of Realtors, expect mortgage rates to decrease over the coming year. He expects rates to fall to 5.5% by mid 2023. Others, like Glenn Brunker at Ally Homes, expect a rejuvenation of the housing market with rates hovering around 5-6%. Some borrowers have already been able to find mortgage rates below 6%.
Susan Devaney (CEO - Mavins Group) suggested, “The buying pool is still high. Families who weren't able to find a home in the months pre-rate increase, still need homes. Now that rates are easing, they are back out in strong force with a limited housing stock.”
Here at Ultra Mortgage, we can guide you to find ways of finding the lower rates in the market. For example, there are alternative products that will allow you to purchase a property even with foreclosures or bankruptcies on your credit. In addition, we can currently have the most competitive rates for jumbo and high balance loans.