Zillow CEO Says Don’t Wait, Best to Sell Home Now

Last updated on January 8th, 2018

In a rather odd interview on CNBC Thursday, Zillow CEO Spencer Rascoff said it’s “definitely a great time to sell,” despite the fact that home prices are expected to rise a fair amount in the near future.

Funnily enough, back in March his company asked a bunch of economists about the direction of home prices, and the consensus was a fairly decent 21.99% increase through 2017.

Even Stan Humphries, Zillow’s chief economist, sees home prices climbing 18.42% over the five-year period.

To be sure, home prices have been on a tear lately in many parts of the country that were previously hit hard by the housing crisis, including Phoenix, Los Angeles, and the Bay Area.

But Rascoff sees the current level of home price appreciation as unsustainable, and expects it to fall back in line with historical norms.

Supply and Demand

distressed

The culprit at the moment has been supply and demand. There aren’t many homes for sale, and distressed properties have all but disappeared.

The April pending and distressed sales report from the California Association of Realtors revealed that the combined share of distressed properties (short sales and foreclosures) fell to 24.4%, down from 27.9% in March and 45.8% a year earlier.

Distressed sales are now at their lowest level since February 2008, and only really expected to keep falling as more borrowers gain home equity and get back above water.

There are also Wall St. investors (hedge funds) buying up bundles of properties, making it difficult for the average Joe to get in on the action, even if something does pop up.

Perhaps Rascoff is doing his part to improve the inventory situation, which is dismal and hopeless at best.

Why Sell Now as Opposed to Later?

So why the heck should homeowners get out now if they stand to do better if they hold on a bit longer, especially if they’ve seemingly survived the worst of it?

Well, his issue seems to be rising mortgage rates, which have increased nearly 1% in the past month or so thanks to improved economic conditions and possible tapering of the Fed’s mortgage buying program.

The 30-year fixed, which was recently in the low 3% range, is now in the low 4’s, with fears it could rise even more as the economy gets back to normal.

The implication here is that rising rates would make it more difficult for prospective home buyers to purchase homes, so selling now while rates are low would increase the pool of eligible buyers.

Additionally, the low rates on offer at the moment allow sellers to list their homes at a premium, seeing that buyers have greater purchasing power at lower mortgage rates.

This seems to explain why buyers are continuously bidding up prices, often well beyond the original listing price. In their eyes, a low mortgage rate may trump all, especially if they plan on keeping the home for the foreseeable future.

And I kind of agree with Rascoff here – if you sell now, you can basically snag the future premium without a wait, seeing that homes are currently selling for future prices.

In coming years, home prices may cool off and sell for what they sold for in 2013. And today’s sellers can get rid of their homes fast, without much scrutiny from the buyer.

Fast forward a few years and you might have to deal with a more discerning buyer, which could make selling a lot more difficult. There’s also no guarantee that home prices will appreciate over the next few years.

Still, Rascoff didn’t have an answer when one of the CNBC talking heads asked where the seller would go once they sold.

And that’s the issue at the moment – if you sell your home today, where do you go? How do you get another one? Do you rent? Do you wait for a better entry point?

Perhaps it’s better just to stick around and enjoy a super low fixed mortgage rate for a while…

Read more: Do higher mortgage rates lower home prices?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Mortgage Rates Would Need to Rise to 7% Before Median Home Unaffordable

Posted on June 18th, 2013

Just about everyone knows mortgage rates have shot up rather dramatically recently. And now some of the major market players are actually addressing the matter, which seems a tad unusual.

This morning, mortgage financier Freddie Mac discussed how 30-year fixed mortgage rates have increased about 40 basis points (0.40%) since May, rising from the 3.5% range to about 4%.

Clearly this is not good for the nascent housing recovery, nor is it good for homeowners looking to qualify for a mortgage.

But just how much of an impact will the rising mortgage rates make? Freddie answers this question in their June 2013 U.S. Economic & Housing Market Outlook.

Some Real Estate Markets Are Already Unaffordable

mostly affordable

Funnily enough, even when mortgage rates were at record lows, housing was unaffordable in some of the most popular metropolitan areas of the country.

For example, in Los Angeles, the median sales price was $365,000 in March, while the median family income was $65,000.

Using a maximum 28% housing debt-to-income ratio and an assumed 10% down payment, Freddie concluded that Los Angeles was already too pricey for the average resident.

Put simply, the average home in LA would require a monthly housing payment (including taxes and insurance) in the ballpark of $2,200, well above the $1,500 or so available.

So for Los Angeles residents, the rising mortgage rates will just reduce the pool of eligible buyers, which may actually be a godsend for the more well-to-do prospective buyers looking to reduce pesky competitors.

Of course, affordability varies widely, even if just nearby. In Riverside, the median family income of $60,000 is enough to purchase the median home price of $219,000, even with a 4% mortgage. But if rates rise to 5%, properties in Riverside will also become unaffordable to many.

The same goes for other metros throughout the country, including Denver and Washington D.C., which would become unaffordable at 5%.

[See my mortgage payment graphs to compare different rates and payments.]

New York and Los Angeles Need More than Low Mortgage Rates

payments

Unsurprisingly, the New York City and Los Angeles metros are the least affordable in the country, and the most vulnerable to interest rate spikes.

Both are already unaffordable with mortgage rates at 3.5%, and it just gets worse as rates climb higher.

With rates around 4%, the max purchase price is the NYC-area is about $298,000, while it’s $249,000 in LA. Good luck finding inventory at those price points…

If rates climb to 5%, the maximum sales prices fall to $274,000 and $229,000, respectively.

At 6%, you’re looking at a max of $252,000 and $211,000, which is downright impossible to find, especially if home prices are expected to rise in tandem with rates.

As you can see from the affordability chart above, things are pretty bleak for the prospective homeowner regardless of rate.

And this is the case in other hard-hit areas of the country, including Miami, San Diego, the Bay Area, Boston, Denver, Portland, etc.

Two notable exceptions are Las Vegas and Phoenix, where mortgage rate increases alone won’t end the home appreciation party.

[What mortgage rate can I get with my credit score?]

Midwest Affordable, Even If Rates Double

still affordable

The story is quite a bit different in other popular metros throughout the nation, including Chicago, Houston, and Dallas.

In all three areas, mortgage rates could climb to 8% and still be affordable for the median household.

For the nation as a whole, rates would need to increase to nearly seven percent for the median priced home to be deemed unaffordable to the average family.

Yes, higher rates would certainly reduce the maximum purchase price, but the impact is a lot more muted.

Here’s the good news – long-term fixed mortgage rates are only around 4%, despite the recent doom and gloom.

And they’re largely expected to steady at current levels, and eventually rise to just 4.5% in 2014.

In other words, it’s not as bad as the headlines let on, though if you’re in a more expensive market, you’ll definitely feel it.

Read more: How much house can I afford?

Source: thetruthaboutmortgage.com

Fannie Economist: Rising Mortgage Rates Should Slow Purchases, Not Lower Prices

Last updated on November 19th, 2017

A new commentary written by Fannie Mae’s Vice President of Applied Economic and Housing Research, Mark Palim, aims to put fears of rising rates to bed.

In the analysis posted on Fannie’s website, Palim notes that the recent increase in mortgage rates shouldn’t derail the nascent, yet rather fragile housing recovery.

But surely one would logically assume that a larger monthly mortgage payment would mean home prices would have to come down, right? Not exactly.

There’s No Historical Correlation

rates and prices

He points to history, which shows no strong correlation between rising interest rates and slumping home prices. And he uses charts to state his case.

Going back to 1990, there were two notable mortgage rate spikes. The first occurred between October 1993 and December 1994, when 30-year fixed mortgage rates increased from 6.83% to 9.20%.

For the record, that’s a 34.7% increase. Still, home prices weren’t really affected, as you can see from the chart above. As Palim pointed out, appreciation slowed, but year-over-year prices were still higher.

The second notable spike occurred between October 1998 and May 2000, when rates increased from 6.71% to 8.51%.

That’s a 26.8 increase, in case you’re wondering. During that time, home prices didn’t seem to lose any momentum, and actually appeared to keep increasing at a reasonable pace.

While those examples are perhaps telling of what may happen as rates continue to rise, Palim himself did admit that the recent toying with rates (via quantitative easing) has no “historical precedent.”

In other words, we are in uncharted territory, despite leaning on the old maxim that higher mortgage rates don’t lead to lower home prices.

That said, let’s take a closer look at what’s happened over the past month and change. During the week ending May 2, 30-year fixed mortgage rates averaged 3.35%, not far off their record low, per Freddie Mac data.

This week, the 30-year fixed averaged 4.37%, which is a 30.4% increase. So in just over a month, mortgage rates nearly matched the worst run-up seen since 1990. And that rate spike took over a year to materialize.

So we are indeed in unprecedented times, and it’s not totally possible to predict the future, seeing that we don’t have anything to go on here.

It should also be noted that home prices have shot up in recent months as well, so affordability has really taken a hit (See the NAR chart for more on that).

[Check out my mortgage payment graphs to see how much the higher rates will cost you.]

Home Purchase Volume Should Slow

rates and sales

What we do know is that this substantial rate increase of late should have more of an effect on home sales, which historically slow when rates increase.

As you can see from the chart above, when rates spiked, home sales seemed to take a dive on both occasions, though they did march ever higher, largely because mortgage rates continued to ease over time.

So the big question is how much more will mortgage rates rise, and if they continue on their upward trajectory, will home sales come to a crawl again? Or worse, will home values begin to stagnate and fall?

This is a serious concern at the moment, seeing that many homeowners remain underwater, and are probably only making mortgage payments with the expectation they’ll soon have some positive amount of home equity.

If that scenario doesn’t materialize, the housing market could go bust again, and that would really rattle the nerves of Americans nationwide. Sadly, most still aren’t even convinced we’re on the path to recovery.

In fact, a poll from Yahoo! Finance this morning asked readers if they were bullish on housing. The top answer was, “I think real estate is on shaky ground.”

Put simply, consumer confidence is still not even close to where it should be if we’re truly experiencing a solid recovery.

One thing is for sure though – as rates rise and affordability decreases, homeowners will increasingly turn to adjustable-rate mortgages to finance their purchases. History is pretty clear on that trend.

Read more: Watch out for the adjustable-rate mortgage pitch.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Frigid February Cools Off Monthly Home Sales

During harsh winter weather in February, nationwide sales of single-family homes fell to their lowest in nine months. So reports Reuters.

Home Sales to Vets Increase

New home sales tumbled 18.2% to a seasonally adjusted annual rate of 775,000 units in the month, according to the Commerce Department.

Experts said a record jump in lumber costs and rising mortgage rates could slow housing sales in 2021.

Read the full article from Reuters. 

Source: themortgageleader.com

Home Buyers Are More Worried About Rising Mortgage Rates than Prices

Posted on July 10th, 2013

A new survey from Trulia revealed that rising mortgage rates are the chief concern among those who plan to buy a home sometime in the future.

The company polled 2,000 people in late June after the uptick in mortgage rates, and found that 41% said their biggest worry was mortgage rates rising before they closed on their home purchase.

Amazingly, it beat out of the next biggest concern, which was rising home prices. Only 37% of respondents listed that as their number one issue, which tells you how important low mortgage rates are to consumers these days.

The third biggest concern for prospective buyers was simply finding a suitable property to purchase, seeing that inventory is so poor at the moment.

13% Believe a Mortgage Rate at 4% Is Already Too Expensive

Perhaps the Fed went too far in its quest to push mortgage rates lower, as it seems to have led to a major distortion of reality.

In fact, 13% of those surveyed by Trulia indicated that a 4% mortgage rate was enough to discourage a home purchase. Talk about being bearish on housing…

For the record, mortgage rates on the 30-year fixed are already around 4.5% or higher, so we know some would-be buyers are apparently out already.

And another fifth of respondents said a 5% mortgage rate would push them out of the game, or at least discourage them.

If rates were to rise to 6%, another 22% said they’d be discouraged to buy a home.

Taken together, more than half of those surveyed (56%) would be lukewarm about a home purchase if rates shot up to 6%, which is a historically low rate and more than realistic over the next several years.

After all, rates hovered around that level for much of the 2000s, so returning to 6% wouldn’t be all that unheard of.

For renters who plan to buy a home eventually, 62% said they’d be discouraged if rates hit 6%.

Talk about spoiling consumers with super low mortgage rates.

[Check out mortgage payments at different rates.]

Did the Low Mortgage Rates Create a False Recovery?

As far as I’m concerned, this calls into question the validity of the supposed housing recovery we’ve all been so convinced about lately.

Yes, housing has improved on a number of fronts, with both distressed and non-distressed inventory down considerably, and mortgage delinquencies lower.

But do we only have the artificially low mortgage rates to thank for that? Did the low rates alone convince more homeowners to stay put, as opposed to walk away? And did they push more would-be buyers to scoop up homes when housing was completely unfashionable?

I hate to say it, but without mortgage rates on the clearance rack, this housing recovery may have never taken flight.

As others have noted, home prices relative to income are still historically high, meaning it is only the low mortgage rates that making housing affordable today.

And if rates rise back to historical norms, monthly mortgage payments wouldn’t be cheap compared to renting in many markets.

Sure, they’d have to rise to 7% to make the median home unaffordable, per Freddie Mac, but that doesn’t mean it would make sense to buy a home. And most hot markets are already unaffordable, even with the low rates.

Unfortunately, home prices have already shot back to recent highs in a lot of markets, so if rates also continue to rise, things won’t be so rosy anymore.

Perhaps we’re looking at a major housing cool-down over the next few years, now that the low rate party is over, and prices aren’t nearly as cheap as they once were.

So if you can come to terms with less-than-stellar home price appreciation, maybe that new home is for you. Just don’t buy with the sole expectation of exponential home price gains. They may have already come and gone.

Read more: Home prices vs. mortgage rates

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Chart: Housing Affordability Set to Fall Off a Cliff

Last updated on September 9th, 2013

The National Association of Realtors will always be the first ones to tell you that housing is either highly affordable, still affordable (!), or that buying a home remains a great move even if housing affordability is low.

After all, they represent real estate agents, or rather, Realtors®, whose livelihood depends on selling homes, lots of homes.

In other words, they gush optimism, regardless of which way the market is headed.

But they threw a chart up on one of their blogs last week that certainly didn’t do them any favors, even though they tried to paint it in a positive light.

This Is the Affordability Chart Before Mortgage Rates Surged

affordability

If you look at the chart above, you’ll see the NAR’s measure of housing affordability, which takes into account average mortgage rates and median home prices, assuming the buyer puts down 20% and has a 25% front-end debt-to-income ratio.

As you can see, housing affordability took a major dive in May as home prices reached their highest point since July 2008.

While that’s all good and well for existing homeowners, it means those looking for an opportunity to purchase a home are running out of time, assuming they want to buy for the investment aspect.

The scariest part of this chart, however, is that it relied on the FHFA’s mortgage rate data from May.

During the month of May, the FHFA said mortgage rates actually fell 0.15% from April. Unfortunately, most of us know that mortgage rates are nowhere close to May levels anymore.

And we all know they didn’t drop in June, not by a long shot.

In fact, mortgage rates are back up to levels last seen two years ago. So taken together, we’re looking at mortgage rates that are significantly higher, coupled with home prices that are back at 2008 levels (and still rising).

Put simply, this chart is going to look a lot worse when NAR releases their next update on housing affordability.

Of course, they’ll likely come up with a way to make it look less detrimental, perhaps by comparing monthly mortgage payments on a small loan amount. Oh wait, they did that already.

I’m not trying to be overly pessimistic here – mortgage rates are in fact still historically low, as I’ve pointed out several times lately. And home prices aren’t back to their peak levels.

But we aren’t as far off from that crazy time anymore, and who’s to say we should return to those prices anytime soon.

Things didn’t exactly pan out very well back then. And the economy doesn’t exactly look stellar enough to support those boom times at the moment.

Read more: Home buyers are more concerned with rising mortgage rates than home prices.

Below is an updated chart released on September 6th, 2013. As you can see, affordability dropped to about a five-year low, and the Realtors expect it to sink next month as well:

updated chart

There’s still some room before we get back to those really dark years in 2006 and 2007, but we appear to be heading in that same direction for now…

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Mortgage Jobs on the Line as Rates Rise

There’s been plenty of debate lately about the potential consequences of rising mortgage rates, with an outright housing recovery derailment topping the list of concerns.

However, most economists have been quick to downplay the risks of rising rates, which have shot up from near-record lows to two-year highs in a matter of months.

In fact, many of these pundits simply expect refinance activity to slow, while the housing market recovery continues on its merry way, in spite of decreased affordability.

Of course, the experts have made some concessions along the way; most recently, Fannie Mae’s Vice President of Applied Economic and Housing Research argued that higher mortgage rates should slow purchase volume and result in a larger adjustable-rate mortgage (ARM) share.

At the same time, Fannie’s researcher didn’t think higher interest rates would lower home prices, but rather only slow the speed of appreciation, which has been on a tear lately.

Then there’s Ara Hovnanian of K. Hovnanian Homes, who argues that higher mortgage rates will just lead to smaller home purchases, and at worst, the purchase of a townhouse if affordability takes a serious dive. Don’t worry, he’s got a smaller home design in the pipeline…

Here Come the Layoffs

All that debate aside, one thing is for certain. There will be fewer mortgage jobs going forward. I anticipated this in my 10 predictions for mortgage and housing in 2013.

It wasn’t hard – I knew mortgage origination forecasts were being slashed going into the year, with refinance volume expected to fall from $1.2 trillion last year to $785 billion in 2013, per the MBA.

Meanwhile, purchase-money mortgage volume was only slated to rise from $503 billion to $585 billion, probably not enough to add many new positions, or offset the fallout in the refinance department.

With volume predicted to be well off recent levels, it didn’t take a genius.

And seeing that rates have increased a lot more than projected, those numbers may turn out to be even worse. For the record, I was wrong about mortgage rates. I expected sideways movement for much of the year. I concede.

Anyway, the mortgage layoffs have already begun, with Wells Fargo announcing late last week that it was cutting 350 employees nationwide as a result of higher home loan rates.

Wells Fargo spokesperson Angie Kaipust said increased demand during the low interest rate environment enjoyed over the past few years meant it could “staff up,” but now that rates are a bit more realistic, headcount must align.

The San Francisco-based bank plans to cut jobs in a number of cities, including Des Moines and Minneapolis.

Then there’s Citi, which reportedly opened a sales facility in Danville, Illinois after demand for mortgage refinances surged. Sadly, the unit is being shuttered, and roughly 120 employees will be laid off.

These are but two examples. Many smaller shops are probably slashing their workforces as well, though such news won’t make the headlines.

2014 Mortgage Origination Forecasts Point to Even Fewer Jobs

The outlook isn’t exactly bright for 2014 either, according to the latest housing forecast from Fannie Mae, so expect more heads to roll as volume continues to dwindle.

Yesterday, the GSE noted that residential lenders are expected to originate just $1.07 trillion in loan volume in 2014, down from $1.65 trillion this year, and about half the $2.03 trillion seen in 2012.

The refinance share, which was 73% in 2012, is expected to fall to 62% this year, and to just 31% in 2014. Only the advent of HARP 3 could make a meaningful impact at this point, and it doesn’t seem likely now.

Fannie expects purchase activity to rise from $619 billion this year to $741 billion in 2014, while refinance activity is forecast to plummet from just over $1 trillion to $331 billion.

Clearly few loan officers will be needed to handle that sharp drop in demand.

Update: It’s starting to feel like 2007 all over again – I’m receiving tips again about branch closures and layoffs. The latest being, “Residential Finance of Columbus Ohio hacked 19 branches yesterday and a regional manager.”

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Gauge of U.S. pending home sales declines to a six-month low

A gauge of U.S. pending home sales fell to a six-month low in January as buyers competed for a limited number of properties.

The National Association of Realtors’ index of pending home sales decreased 2.8% from the prior month to 122.8, according to data released Thursday. December data was revised to a 0.5% gain after a previously reported decline. The median estimate in a Bloomberg survey of economists called for no change in January.

The decline is the latest sign that the housing boom may be starting to cool amid soaring prices, a lack of inventory and rising mortgage rates. The residential real estate market has been a bright spot in the economy as it recovers from the pandemic. Contract signings are still up 8.2% from a year ago on an unadjusted basis.

“There are simply not enough homes to match the demand on the market” Lawrence Yun, chief economist at the NAR, said in a statement. Still, Yun said he expects inventory to rise in the coming months.

The lack of inventory thus far has driven prices upwards, putting homeownership out of reach for some, said Joel Kan, the Mortgage Bankers Association’s associate vice president of economic and industry forecasting.

“Various other data sources have pointed to higher median sales prices and record-high purchase mortgage loan sizes, all of which have started to create affordability challenges in many parts of the country,” he said. “While home building has picked up to attempt to meet the high demand, increased listings of existing homes will be needed in the coming months to alleviate this shortage of housing inventory.”

By region, contract signings fell in the West, Northeast and Midwest. In the South, the index for pending home sales rose to the highest since August.

Source: nationalmortgagenews.com

Pending Home Sales Fall in January as Inventory Constrains Buyers>

The numbers: The index of pending home sales fell 2.8% in January after four consecutive months of declines, the National Association of Realtors said Thursday. The index captures real-estate transactions where a contract was signed but the sale has not yet closed, making it an indicator of where existing-home sales will go in the months ahead.

The median forecast of economists polled by MarketWatch had called for a 0.5% decline in pending sales on a monthly basis.

“Pending home sales fell in January because there are simply not enough homes to match the demand on the market,” Lawrence Yun, the chief economist for the National Association of Realtors, said in the report. “That said, there has been an increase in permits and requests to build new homes.”

Compared to 2019, pending sales were up 13%, indicating that the housing market remains strong despite the weakness that has crept in during the winter months.

What happened: Pending sales didn’t fall across all regions, as contract signings increased slightly in the South. The largest decline in pending sales occurred in the West, where the index dropped 7.8%, closely followed by the Northeast (-7.4%).

The big picture: A record-low inventory of homes is leaving buyers with few options to choose from, and builders have even begun selling a vast array of properties that haven’t been built yet to meet this demand.

But there’s evidence that demand could begin to suffer as affordability concerns grow. “The timely weekly mortgage purchase applications index is signaling a slowing in activity,” said Rubeela Farooqi, the chief U.S. economist at High Frequency Economics, while citing mortgage application data from the Mortgage Bankers Association. The latest reading signified the lowest level for mortgage applications since mid-May of last year, Farooqi noted.

Some of the decline in the volume of mortgage applications was a reflection of the disruption in Texas caused by recent winter storms. But generally speaking, rising mortgage rates are reducing interest from home buyers to an extent. With prices also quickly rising, buying a home is becoming less and less affordable, which could hinder home sales in the months to come.

What they’re saying: “Home buyers are staying surprisingly active during the colder months. However, buyer demand is getting squeezed by a scarcity of ‘For Sale’ signs and rising mortgage rates,” said Realtor.com senior economist George Ratiu.

Source: marketwatch.com

Mortgage demand drops as interest rates hit a three-month high – CNBC

An ‘Open House’ sign is displayed in the front yard of a home for sale in Columbus, Ohio.

Ty Wright | Bloomberg | Getty Images

Mortgage interest rates have increased in four of the first six weeks of 2021, putting a chill on mortgage demand.

Overall mortgage application volume fell 4.1% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The move down came as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $548,250 increased to 2.96% from 2.92%, for loans with a 20% down payment. The rate was 76 basis points higher a year ago.

Refinance demand, which is most sensitive to weekly rate fluctuations, fell 4% for the week but were 46% higher than a year ago. That annual comparison had been over 100% at the start of this year but has been shrinking.

“Despite some weekly volatility, Treasury rates have been driven higher by expectations of faster economic growth as the Covid-19 vaccine rollout continues,” said Joel Kan, the MBA’s associate vice president of economic and industry forecasting.

The refinance share of mortgage activity decreased to 70.2% of total applications from 71.4% the previous week, the lowest level in three months.

Homebuyers are also pulling back, but less because of rising mortgage rates and more because of low supply and overheating home prices. Mortgage applications to purchase a home fell 5% for the week but were still 17% higher year over year.

“Purchase applications cooled the first week of February, but homebuyers are still very active,” Kan said. “The average purchase loan size continued to increase, reaching another survey high of $402,200, as the higher-priced segment of the market continues to perform well.” The MBA began its weekly survey nearly 31 years ago.

The higher-priced segment is doing so well because there is so much more supply. The low end of the market is incredibly slim, and that is forcing first-time buyers to the sidelines. The total number of homes for sale in January hit a new low, down nearly 43% from a year earlier, according to realtor.com. Homes also sold on average 10 days faster.

Source: cnbc.com