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Despite rising interest rates, mortgage demand is once again rising
Interest rates decreased following recent bank failures, causing a three-week rise in mortgage demand. However, rates are increasing again, potentially lowering applications. The Mortgage Bankers Association reported a 3% increase in mortgage applications last week. The average 30-year fixed-rate mortgage interest rate dropped from 6.71% to 6.48%, but remains higher than the previous year's 4.5%. Refinancing requests increased by 5% but were 68% lower than last year. Mortgage applications for house purchases rose by 2% but were 36% lower than the same week last year. Economic factors like banking instability, high property prices, and limited housing supply are impacting consumer confidence more than interest rate fluctuations.
February saw a 14.5% increase in home sales as the median price fell for the first time in over ten years
Sales of previously owned homes rose 14.5% in February compared to January, reaching a 4.58 million unit yearly rate, according to the National Association of Realtors. This marks the first monthly growth in a year, although sales remained 22.6% lower than February of the previous year. Mortgage rates played a role, with the average 30-year fixed loan rate staying in the low 6% area in January. Median home prices dropped 0.2% to $363,000 compared to February 2022. All-cash sales accounted for 28% of transactions, and individual investors made up 18% of buyers. Sales across all price points were down approximately 20% from February last year, with the sharpest decline in the million-dollar-plus segment.
Homebuilders claim that demand is increasing, but they are worried about potential banking repercussions
Despite high mortgage rates, expensive homes, and unchecked inflation, US homebuilders are feeling more optimistic. The National Association of Home Builders/Wells Fargo Housing Market Index rose two points to 44 in March, marking the third consecutive monthly increase. Last year, the index was at 79 when mortgage rates were significantly lower. Builders face high construction costs and supply chain disruptions but report strong demand as buyers wait for interest rates to drop. However, instability in the banking system and interest rate volatility create uncertainty for the outlook. Among the index components, current sales conditions increased to 49, buyer traffic to 31, while sales expectations for the next six months fell to 47. Limited housing inventory and high costs remain constraints for buyers. Regional builder sentiment showed an increase in all areas, with the South leading at 45 points.
