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Mortgage Rates Continue To Spook Home Buyers

Mortgage applications fell 0.5% in the latest week, the Mortgage Bankers Association said. Purchase applications are at the lowest since 2014.

Market Watch | November 4, 2022


THE NUMBERS

Mortgage applications fell 0.5% this week, as rates remain firmly above 7%.


Rates rose for the sixth week in a row, and home buyers continued to pull back on purchasing homes.


High rates weighed down the market composite index, a measure of mortgage application volume, the Mortgage Bankers Association (MBA) said on Wednesday.

The market index dropped 0.5% to 200.1 in the week ending October 28. A year ago, the index stood at 623.8.

Applications continue to trend at the lowest level since the group started tracking the data in 2000.


KEY DETAILS

The refinance index rose 0.2%, but was down 85% compared to a year ago.


The purchase index, which measures mortgage applications for the purchase of a home, fell by 0.8% from the previous week.


The purchase index has dropped to the slowest pace since December 2014.


The adjustable-rate mortgage share of activity dropped to 11.8% applications.


The average contract rate for the 30-year mortgage for homes sold for $647,200 or less was 7.06% for the week ending October 28.


That’s down from 7.16% the week before, the MBA said. While the 30-year dropped for the first time in over two months it’s still at a 20-year high, the MBA noted.


For homes sold for over $647,200, the average rate for the 30-year was 6.55%.

The 15-year dropped to 6.37%.


The rate for adjustable-rate mortgages rose to 5.79%.


THE BIG PICTURE

The data continues to tell us that the housing sector is in turmoil.


High mortgage rates “continue to put pressure on both purchase and refinance activity” and add to the “ongoing affordability challenges impacting the broader housing market” as evidenced by falling housing stars and home sales, Joel Kan, vice president and deputy chief economist at the MBA, said.


But there’s a silver lining: Homes are staying on the market longer, so buyers have more choices, as compared to the pandemic days where they had to contend with bidding wars. Nearly half of for-sale listings have been on the market for more than 60 days.


HOME BUYER AFFECTS

With a $2,000 average monthly payment budget, you would’ve been able to afford roughly a $467,800 home a year ago with the 30-year at 3.24%, and with 20% down.


Now, with rates at 7.06%, a buyer would be able to only afford a home roughly worth $321,600 based on data in 2000.

 

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