Weekly mortgage demand hits lowest level since February 2020

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Fewer mortgages are being signed up, but there is a good explanation for this.

Though mortgage rates are no longer at an all-time low as they were several times last year, but they remain competitive nonetheless. But despite this, mortgage Application volume fell 4% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Moreover, the volume of home loans fell to their lowest level since February 2020.

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Why are fewer home loans being signed?

Right now there is record low number of houses are available on the market and the aforementioned numbers are largely to blame. After all, if there are no homes to buy, no new mortgages will be signed.

It could also be that some buyers are finally starting to retreat given how house prices have been rising during the pandemic. Low inventory levels have driven prices soaring and many homes are forced to bid, causing buyers to spend even more trying to outperform each other to get their bids accepted.

The value of new-build homes has also risen, in part due to a severe shortage of lumber, which has led to a spike in building material prices. During these days, new buildings cost about $ 36,000 more, on average, which underestimates some buyers.

Overall, the combination of low housing stock and high house prices is likely to deter buyers, and mortgage rates themselves are far from the reason the volume of mortgages is declining.

What about refinancing?

Refinancing the number of applications also declined last week, despite a slight decrease in mortgage rates. The reality is that many homeowners looking to refinance did so last year when refinancing rates were extremely attractive. While they are now quite competitive on a historical basis, they did not hit the record lows they did in the second half of 2020.

Will the demand for mortgages increase?

If housing stocks open up in the coming months and more offers come to the market, we may see a surge in mortgage volumes, especially if rates remain at or near current levels. But right now, that’s a pretty big if.

New listings usually boom in the spring, but that hasn’t happened this year, and if sellers don’t move in the next few months, many are likely to make the decision to ride out the winter, which can be tricky. time to sell – and list your homes in spring 2022. If this happens, the demand for mortgages may stall for several months before recovering again, and many buyers may find themselves in a loop when they want to buy a home, but I cannot find one that is financially or logistically suitable.

Of course, we don’t know if the usual spring wave will happen instead this summer this year, and it may well be. But until inventories start to rise and house prices begin to fall, mortgage activity is likely to stagnate or even decline, as it did last week.

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