Mortgage rates climb higher to 2.97%

The average mortgage rate for a 30-year fixed loan is now just 3 basis points away from 3%, after a 16 basis point jump last week pushed mortgage rates to 2.97%, according to Freddie Mac’s Primary Mortgage Market Survey.

The average mortgage rate hasn’t risen this high since the end of July 2020, but Sam Khater, Freddie Mac’s chief economist, noted higher rates signals an economy slowly regaining its footing.

“Though rates continue to rise, they remain near historic lows,” said Khater. “However, when combined with demand-fueled rising home prices and low inventory, these rising rates limit how competitive a potential homebuyer can be and how much house they are able to purchase.”

Rising rates didn’t slow new home sales in January though, after the U.S. censes bureau reported sales of new single-family houses in January were at a seasonally adjusted annual rate of 923,000 — 4.3% above December’s rate.

“However, recent increases in mortgage interest rates threaten to exacerbate existing affordability conditions. Builders are exercising discipline to ensure home prices do not outpace buyer budgets,” said National Association of Home Builders Chief Economist Robert Dietz.


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While purchase demand hasn’t shown any sign of decline, the refi wave is showing more vulnerability. As rates rose, refi activity fell 11% according to data from the Mortgage Bankers Association.

For many potential borrowers, the opportunity to refinance is lost before the chance even arises, while other prospective borrowers are caught in a clogged loan pipeline and don’t get the opportunity to lock in that low rate.

According to HousingWire’s lead analyst Logan Mohtashami, a one-eighth to a quarter turn in mortgage rates (high or low) can move the market substantially.

“There are people who had a 4.00% rate that refinanced to 3.25% and then said, ‘Oh well now that rates are low, I’ll refinance again to 2.75%.’ But if that rate sneaks up a quarter it’s no longer ideal and it’s lost its appeal. They are going to wait for it to come back down, right? And then it doesn’t,” Mohtashami said.

Source: housingwire.com

Mortgage Application Volume Continues Decline

The volume of
mortgage applications for both home purchase and refinancing fell for the third
straight time during the week ended February 19.
The Mortgage Bankers
Association (MBA) says its Market Composite Index, a measure of that volume,
dropped 11.4 percent on a seasonally adjusted basis. It was the largest single
week decline since the week ended April 3, 2020. On an unadjusted basis the index
was down 10.0 percent.

The Refinancing
Index decreased 11 percent from the previous week but was still 50 percent
higher than the same week one year ago. The refinance share of mortgage
activity decreased to 68.5 percent of total applications from 69.3 percent the
previous week.

The seasonally
adjusted Purchase Index dropped 12 percent and was 8 percent lower before adjustment.
Activity was 7 percent higher than the same week one year ago.

 

Refi Index vs 30yr Fixed

 

Purchase Index vs 30yr Fixed

 

“Mortgage
rates have increased in six of the last eight weeks, with the benchmark 30-year
fixed rate last week climbing above 3 percent to its highest level since
September 2020. As a result of these higher rates, overall refinance activity
fell 11 percent to its lowest level since December 2020
, but remained 50
percent higher than a year ago,” said Joel Kan, MBA’s Associate Vice President
of Economic and Industry Forecasting. “Additionally, the severe winter weather
in Texas affected many households and lenders, causing more than a 40 percent
drop in both purchase and refinance applications in the state last week.” 

Added
Kan, “The housing market in most of the country remains strong, with activity
last week 7 percent higher than a year ago. The average loan size of purchase
applications increased to a record $418,000, in line with the accelerating
home-price growth caused by very low inventory levels.” 

The
FHA share of total applications jumped to 11.2 percent from 9.0 percent the previous
week while the VA share fell to 11.9 percent from 13.2 percent and the USDA
share dipped 0.1 point to 0.3. The balance of all loans was $344,800, up from
$338,200 and for purchase loans the balance grew from $412,200 to $418,000.

The average
contract interest rate for 30-year fixed-rate mortgages (FRM) with balances at
or below the current conforming limit of $548,250 increased to 3.08 percent
from 2.98 percent, with points increasing to 0.46 from  0.43. The effective rate was 3.22 percent. 

The
rate for jumbo 30-year fixed-rate mortgages, loans with balances greater than the
conforming limit, increased to 3.23 percent from 3.11 percent, with points increasing to 0.43 from
0.35. The effective rate was 3.35 percent.

Thirty-year
FRM backed by the FHA had an average rate of 3.00 percent with 0.33 point. The
prior week the rate was 2.93 percent with 0.27 point. The effective rate
increased to 3.10 percent.  The rate for
15-year fixed-rate mortgages increased 9 basis points to 2.56 percent and
points grew to 0.40 from 0.36. The effective rate was 2.66 percent.

The
average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) was unchanged
at 2.83 percent, with points
decreasing to 0.36 from 0.70. The effective rate declined to 3.10 percent.  The ARM share of applications increased from
2.4 to 2.7 percent.  

MBA’s Weekly Mortgage Applications
Survey has been conducted since 1990 and covers over 75 percent of all U.S.
retail residential applications Respondents include mortgage bankers,
commercial banks, and thrifts. Base period and value for all indexes is March
16, 1990=100 and interest rate information is based on loans with an 80 percent
loan-to-value ratio and points that include the origination fee.

MBA’s latest Forbearance and Call Volume Survey found a 7-basis point
decline in the total number of loans in forbearance t
o 5.22 percent of all
first liens as of February 14, 2021. According to MBA’s estimate, 2.6 million homeowners
are in forbearance plans.  Of those
loans, 15.9 percent are in the initial forbearance plan stage, while 81.6
percent are in a forbearance extension. The remaining 2.5 percent are re-entries
in the program. 

The
share of Fannie Mae and Freddie Mac (GSE) loans in forbearance decreased to
2.97 percent –
a 4-basis-point improvement. Ginnie Mae (FHA and VA) loans in forbearance ticked
down 2 basis points to 7.32 percent, while the forbearance share for portfolio
loans and private-label securities (PLS) decreased by 20 basis points to 8.94
percent. The percentage of loans in forbearance serviced by independent
mortgage banks (IMB) fell 15 basis points to 5.54 percent, and the percentage
of forborne loans in depository servicers’ portfolios rose 2 basis points to
5.28 percent.

“The share of loans in forbearance has declined for
three weeks in a row, with portfolio and PLS loans decreasing the most this
week. This decline was due to a sharp increase in borrower exits, particularly
for IMB servicers,” said
Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Requests for new
forbearances dropped to 6 basis points, matching a survey low.” 

Fratantoni added, “The housing market is
quite strong, with home sales, home construction, and home price data all
testifying to this strength. Policymakers and the mortgage industry have helped
enable this during the pandemic by providing millions of homeowners support in
the form of forbearance. The decision to extend the allowable duration of
forbearance plans should provide for a smoother transition this year as the job
market continues to recover.”

MBA’s latest Forbearance and Call
Volume Survey covers the period from February 8 through February 14, 2021 and
represents 74 percent of the first-mortgage servicing market (37.1 million
loans).

Source: mortgagenewsdaily.com

Mortgage applications drop for second week

As mortgage rates come off of their historic lows, mortgage applications dropped for the second week, according to data from the Mortgage Bankers Association.

Mortgage applications dropped 5.1% for the week ending Feb. 12, after falling 4.1% the week prior. Notably, the refinance share of activity dropped to 69.3%, the first time it’s been below 70% since October.

“Expectations of faster economic growth and inflation continue to push Treasury yields and mortgage rates higher. Since hitting a survey low in December, the 30-year fixed rate has slowly risen, and last week climbed to its highest level since November 2020,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

On an unadjusted basis, the Market Composite Index decreased 4% compared with the previous week. The Refinance Index decreased 5% from the previous week but was still 51% higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 6% from one week earlier. The unadjusted Purchase Index decreased 1% compared with the previous week and was 15% higher than the same week one year ago.

“The housing market in early 2021 continues to be constrained by low inventory and higher prices. Conventional and government applications to buy a home declined last week, but purchase activity overall is still strong – up 15% from last year,” Kand said. “The average purchase loan size hit another survey high at $412,200, partly due to a larger drop in FHA mortgage applications, which tend to have smaller-than- average loan sizes.”

The FHA share of total applications decreased to 9% from 9.5% the week prior. The VA share of total mortgage applications decreased to 13.2% from 13.3% the week prior. The USDA share of total mortgage applications remained unchanged from 0.4% the week prior.

Here is a more detailed breakdown of this week’s mortgage application data:

  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 2.98% from 2.96%
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) remained unchanged at 3.11%
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 2.93% from 2.97%
  • The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.47% from 2.5%
  • The average contract interest rate for 5/1 ARMs decreased to 2.83% from 2.92%

Source: housingwire.com

Mortgage rates drop to another record low – CNN

The average interest rate on a 30-year fixed-rate mortgage dropped to 2.71%, according to Freddie Mac. That’s the lowest level in the nearly 50 years of the mortgage giant’s survey. The 15-year fixed-rate mortgage dropped to 2.26%.
Despite persistently low mortgage rates, home sales have hit a wall, said Sam Khater, Freddie Mac’s chief economist.
“While homebuyer appetite remains robust, the scarce inventory has effectively put a limit on how much higher sales can increase,” he said. “Unfortunately, the record low supply combined with strong demand means home prices are rapidly escalating and eroding the benefits of the low mortgage rate environment.”
Record low interest rates have fueled this year’s strong rebound and growth in housing markets, but low inventory remains a challenge for home buyers as it pushes prices higher.
This is why it's getting even harder to afford a homeThis is why it's getting even harder to afford a home
“[Low interest rates] have helped homeowners refinance and save money, while simultaneously making it easier for first-time buyers to afford a home,” said George Raitu, senior economist at Realtor.com. “However, double-digit price gains over the past three months have been chipping away at the benefit that low mortgage rates have brought.”
For many Americans today, these low rates do not offer the same monthly savings that they did even six months ago, he said.
“Millions of people are staring at a wall of expiring support programs, such as the pandemic unemployment insurance and eviction protection, which dampen the brightness of the incoming holiday season,” said Raitu. “While we see a light at the end of the pandemic tunnel with upcoming vaccines, there is still a big question around whether Congress can come to terms on a new stimulus package to help the country recover from the current economic downturn.”

Source: cnn.com

Mortgage rates continue to stay low at 2.73%

The average mortgage rate for a 30-year fixed loan remained unchanged last week from the week prior at 2.73%, according to Freddie Mac’s Primary Mortgage Market Survey.

With mortgage rates hovering below 3% for over six months now, Sam Khater, Freddie Mac’s chief economist, said this may be a sign of an economy still struggling.

“This rate environment is advantageous for those who are looking to refinance in order to strengthen their financial position,” Khater said. “While many have already refinanced, the evidence suggests that upper-income homeowners have taken advantage of the opportunity more so than lower-income homeowners who could stand to benefit the most by lowering their monthly mortgage payment.”

Overall, record low mortgage rates are still fanning the refi flame regardless of who’s snagging the offer. The Mortgage Bankers Association reported that the refinance index of mortgage applications hit its highest level since March 2020 last week – a whopping 59% higher year-over-year.

And while borrowers are scrambling to snag what’s left of record low inventory, LOs came out on top. Recent data from mortgage software firm LBA Ware revealed that total funded loan volume by LOs in Q4 2020 increased 106% from the fourth quarter of 2019.


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The average LO managed to produce $2.6 million per month in volume in the last quarter, thanks to all those sweet low mortgage rates. That’s a 63% increase and a whopping million dollars more per person than seen in Q4 2019. 

But LBA Ware Founder and CEO Lori Brewer said loan teams should be cautious as signs the refi train slowing down are starting to show.

“As rates are predicted to rise in 2021 and for several years to come, loan teams that wish to maintain their earnings would do well to put a strategy in place that enables them to offset waning refi volume with more purchase volume,” Brewer said.

Source: housingwire.com

This Is the Most Over-Valued Housing Market in America. Spoiler: It’s Not in California

The breakneck pace of home price growth nationwide has caused more markets nationwide to become overvalued, according to a new report from Fitch Ratings.

Fitch analysts estimate that home prices are 5.5% overvalued nationally as of the fourth quarter of 2020. Through November, national home prices were up some 8.9% since the start of the year, driving the overvaluation in the marketplace, they argued.

“Even though home price growth accelerated in 2020 due to low mortgage rates and demand/supply imbalance, the economy has not caught up,” the analysts wrote. As MarketWatch has reported, the demand among home buyers has far exceeded the inventory of homes for sale.

To some extent, this is a reflection of the fact that many homeowners are reluctant to list their homes for sale amid the pandemic. The imbalance between supply and demand is also the result of homebuilding activity remaining muted following the Great Recession and the preceding housing bubble.

Looking more locally, some housing markets are far more overvalued than others, the report noted. Fitch estimates that around 25% of metropolitan statistical areas (meaning major cities) around the U.S. are more than 10% over-valued.

Among the 20 largest metro areas nationwide, Las Vegas was the most overvalued, with Fitch estimating that home prices were overvalued by approximately 28%. Dallas-Ft. Worth was next, with Fitch projecting that prices were overinflated between 20% and 24%.

Fitch also examined which states had the most overvalued housing markets. Idaho led this list, with Fitch projecting that home prices there were overly elevated between 30% and 34%. Nevada was next.

Idaho has become a popular destination for transplants from California, particularly from San Francisco and Silicon Valley. The rise of remote working amid the pandemic has helped boost demand for homes in Boise, such that home prices there have risen upwards of 10% in recent years.

Other states whose housing markets were found to be overvalued in excess of 10% included Arizona, Texas, Kansas, North Dakota and Washington, among others.

Only 17 states were found to have housing markets where the homes were sustainably priced, according to Fitch’s analysis. Four states were rated as having undervalued housing markets: Connecticut, Illinois, Michigan and New Jersey.

Source: realtor.com

First-Time Home Buyers Find a Tough Market—Here’s What’s Different This Year

Starry-eyed first-time home buyers are getting a rude awakening to the realities of today’s high-stakes home-buying market.

The coronavirus pandemic supercharged the housing market, as buyers urgently seeking more space flooded the market, lured by low mortgage rates. That’s on top of the usual dynamics of household expansion: Many millennials hit 30 and wanted homes that could accommodate a growing family. Amid a historic shortage of properties for sale, the result has been bidding wars and record-high prices. It’s enough to make a first-time buyer’s head spin.

Just under half of first-time buyers and more than a third of prospective buyers were either outbid on their dream home or discovered they couldn’t afford it, according to a recent realtor.com® survey. Roughly a fifth of these buyers made five or more offers on different properties before having one accepted.

Realtor.com surveyed 1,000 recent and first-time home buyers Jan. 7–11.

“The market has been extremely competitive,” realtor.com Senior Economist George Ratiu. “There is a critical shortage of homes for sale, which has caused multiple bids to become the norm across the country.

“For first-time buyers, especially, this environment means having your financing and budgeting together is paramount,” he adds.

But it’s not all bad news. About 47% of first-time buyers were thrilled to find their budgets were larger than they had thought, according to the survey. That’s largely due to mortgage rates, which averaged just 2.73% for a 30-year fixed-rate loan in the week ending Jan. 28, according to Freddie Mac. However, 21% learned their money wouldn’t stretch as far as they had hoped.

Even those in a better financial position still had to compromise on what they wanted in a home—and where it’s located. About a fifth were forced to look in cheaper neighborhoods. Another fifth had to spend more than they had originally planned, and nearly the same number had to forgo some of the home features on their wish lists. These included things like a garage, a big backyard, a finished basement, and a pool.

To save up for a down payment, many also had to make sacrifices. Half of recent first-time homeowners saved up in less than three years by setting aside a portion of their paycheck each month, cutting out discretionary spending on the fun stuff, and depositing windfalls like tax refunds and bonuses in the bank.

Just over half, 52%, also turned to their family and friends for help.

“First-time buyers tend to be younger. This generation has higher student debt than any prior generation,” says Ratiu. “Not surprisingly, family help with providing down payment assistance plays a big role in today’s market.”

Source: realtor.com