Mortgage demand is increasing as high rates do not discourage potential homebuyers from applying for mortgages.
Mortgage demand has risen for the second week in a row despite some volatility in mortgage interest rates. However, while applications to buy a home were up 7% this week, the number is still 38% lower than the same week a year ago. Meanwhile, the Mortgage Bankers Association index revealed that total mortgage application volume increased 6.5% last week compared to the previous week.
Applications to refinance a home loan increased 5% during the week amid developing mortgage demand and interest rates. However, these refinancing requests also represented a massive 74% reduction from the same week a year ago.
The 30-year average fixed contract interest rate mortgage, with conforming loan balances of $726,200 or less, decreased from 6.79% to 6.71%. Adding to this decrease, points on loans with 20% down payment dropped from 0.80 to 0.79, including the origination fee.
It’s worth noting that mortgage rates were predominantly higher throughout the week before falling sharply last Friday. The reason for the recession was due to unpleasant news about the failure of Silicon Valley Bank (SVB), based in Santa Clara.
Mortgage applications also previously dried up in early February after rates rose a full percentage point. However, home buying is on the rise again, likely due to buyer concerns that rates could rise further. Real estate consultant John Burns described the steady rise in home buying in February amid rising interest rates as typical. In his own words, “That always happens when rates go up, and it only lasts a few weeks.”
Homebuilding giant posts positive results amid mortgage demand and volatile rate developments
Leading homebuilder Lennar Corp (NYSE: LEN) recently posted better-than-expected results in its latest earnings release. Weighing in on Tuesday’s welcome development, the Miami-based company’s president, Stuart Miller, explained in a statement:
“Homebuyers are considering the possibility that the current interest rate environment is the new normal. Consequently, the housing market continues to change as increasing household and family formation continues to drive demand in the face of a chronic supply shortage.
On how the first three months of 2023 played out 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 on a winding path trying to find its footing.”
According to the CEO, interest rates and the impact of tags restricted sales activity in December. Miller further explained that lower interest rates in January and early February boosted sales.
Rates rose 7% amid rising inflation in early March
In early March, mortgage rates rose more than 7% for the first time since October amid rising inflation. At the time, Daily Mortgage News reported a 7.1% increase in the average 30-year fixed mortgage rate. Furthermore, the inflation-induced rise in mortgage rates also satisfied a familiar pattern of mortgage rates loosely tracking the 10-year Treasury yield.
Traders may be skeptical about aggressively cutting rates until they are convinced of substantially lower inflation. Meanwhile, the Fed looks set to raise interest rates again at its next fiscal meeting.
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Tolu is a Lagos-based blockchain and cryptocurrency enthusiast. He likes to demystify the crypto stories down to the basics so that anyone anywhere can understand them without too much prior knowledge. When he’s not up to his neck in crypto-stories, Tolu likes music, loves to sing, and is an avid movie buff.
