Mortgage Demand Jumps To Start 2023

After nine months of declines, rate lock volume skyrocketed to start 2023, according to the Black Knight’s latest Originations Market Monitor report.

• M-O-M: Rate lock volume jumped 32% from December snapping a 9-month streak of declines.

• Y-O-Y: Despite the big jump in January, total rate lock volume is down 62.0% from the start of 2022.

Breaking It Down. Purchase locks were up 32% from December while rate/term and cash-outs were up 37%25%, respectively.

• Purchases make up 85% of rate lock volume.

Credit Scores. Buyers looking to buy a home in January had an average credit score of 729, this is up one point from December but is down three points from the same time last year.

• Rate/Term refis saw a big nine-point slide to an average credit of 723 in January while Cash-outs continued their slide with a four-point drop to 687.

• The average for a conforming buyer in January was up two points to 749.

Loan Size Up. The average loan size was up slightly to 240k in January, up 1.0% from December but is down 2.0% from January 2022.

BOTTOM LINE: This report backs up the weekly data from MBA that showed application demand jumping 28% in January. While a 32% jump from a three-year low still looks a lot like a three-year low. It is important to remember that the last three years were an anomaly. In fact, the Market Volume Index is currently at 82 which is only down 22% from the level reported in January 2018.

Inventory

Housing inventory levels saw a big drop as inventory continues to defy expectations, according to the latest report from Altos Research

• Housing inventory fell to 443,000 single-family homes on the market across the whole country. This is down 3% from last week and is now down 11.0% from the start of the year. Inventory levels are now down 46% from the start of the year.

Buyers Coming Back. Just a few weeks ago there 30% fewer pending sales than the previous year. There are now 291,000 single family homes in contract across the US which is 23% fewer than last year. This week, there were 13,000 new pending sales this week which is only 9% fewer than last year at this time. This quite the turnaround for housing demand. While still below last year we are up significantly from the housing lows we saw just a few weeks ago.

• Price Pressure. This uptick in sales is putting upward pressure on prices as home prices climbed 1.0% to $418,200. Home prices are now up 3.0% from the start of the year.

Not What We Expected. Mike Simonsen, CEO of Altos, noted that inventory falling close to all-time lows is not what they expected. “After last fall our models had assumed that inventory would bottom this year in January, and be climbing by 1-2% weekly by now. Instead inventory fell by 3% this week.”