Mortgage demand has fallen in the past two weeks to its lowest level since the 1990s as elevated mortgage rates and fears of a recession take a toll on the market, according to latest data from the Mortgage Bankers Association (MBA).
Joel Kan, MBA’s vice president and deputy chief economist, pointed out that the end of the year tends to be a slower time for the housing market. With mortgage rates above 6 percent and the threat of a recession causing concerns, mortgage applications have fallen to their lowest levels since 1996.
“Purchase applications have been impacted by slowing home sales in both the new and existing segments of the market. Even as home-price growth slows in many parts of the country, elevated mortgage rates continue to put a strain on affordability and are keeping prospective homebuyers out of the market,” he said.
The holiday-adjusted Refinance Index fell 16.3 percent from two weeks ago and 87 percent when compared to the year-ago week.
High Mortgage RatesThe interest rate on a 30-year fixed-rate mortgage averaged 6.42 percent as of Dec. 28, according to data from mortgage lender Freddie Mac. This is down from the peak of 7.08 percent hit in October, but is more than double the 3.11 percent rate a year ago.
In its update, Freddie Mac stated that the housing market remains in doldrums due to falling prices, sales, and inventory.
The decline in sales and the deceleration in home prices had started swiftly at the beginning of 2022, but has moderated of late, it said. The market continues to decline, and housing will remain “weak” throughout winter.
Greg McBride, chief financial analyst for Bankrate, believes the average rate for a 30-year fixed-rate mortgage in January will be between 6.4 percent and 6.6 percent.
Home PricesAccording to property intelligence firm CoreLogic, although home prices in November 2022 were 8.6 percent higher than a year ago, it was the first year-over-year reading in 21 months that price growth was not in double digits. It was also the lowest rate of appreciation since November 2020.
Fannie Mae’s Economic and Strategic Research (ESR) Group is expecting home prices to hit a low point during second quarter 2023, and to recover only in 2024.