“Treasury yields were higher on average last week, while mortgage rates decreased, which was a sign of a narrowing spread between the two,” Kan said. “The spread between mortgage rates and the 10-year Treasury has been abnormally wide since early 2022 — further narrowing of that spread is expected to put downward pressure on mortgage rates in the coming months.”
The seasons ahead
Industry experts believe that the purchase market will recover in the spring, despite the volatility.
“Purchase activity is expected to pick up as the spring homebuying season gets underway, bolstered by lower rates and moderating home-price growth. Both trends will help some buyers regain purchasing power,” said Kan.
Nik Shah, CEO of Home LLC., said buyers are tired of waiting for lower prices and rates.
“So, they are getting 5-year and 7-year adjustable-rate mortgages instead of 30-year fixed-rate mortgages,” Shah said.
The MBA data shows refinancings were 31.9% of the total applications for the week ending January 27, followed by FHA (12% of the total), VA (11.9%) and ARMs (6.7%). The average contract interest rate for 5/1 ARMs decreased to 5.38% last week, down from 5.44% the previous week.
According to Shah, homeowners aren’t selling because they are locked on low rates.
“Most listings are dilapidated homes or new constructions,” he said. “Homes in many markets are already starting to get multiple offers. We’ll learn more during this Summer rush.”
Shah’s projections are that a 4% increase in home prices will occur in 2023 – but that’s only if the Federal Reserve pivots and starts dropping rates after the current tightening monetary policy crashes the labor market.
Source: housingwire.com