Mortgage Demand Falls To 28-Year Low

A big jump in mortgage rates has had a disastrous impact on mortgage demand, according to to go the latest weekly data from the Mortgage Bankers Association.

• Purchase demand fell a whopping 18% from one week earlier and is now 41% lower than the same week one year ago. Purchase demand is now at the lowest level since 1995.

• Refi demand fell 4.0% compared with the previous week and is now 72% lower than the same week one year ago.

Rates. The average contract interest rate for a 30-year fixed-rate mortgage jumped to 6.62%, up 23 basis points from last week and up 44 basis points in just two weeks.

• The average rate for a 15-year fixed was up 14 basis points 5.98%

Analysis. Joel Kan, MBA’s Vice President and Deputy Chief Economist, said it is all about rate right now. “The increase in mortgages rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates.”

Homeowners Lose Trillions

Six months of home price declines have erased trillions of dollars in homeowner equity, according to the latest data from Redfin.

• The total value of U.S. homes was down to $45.3 trillion at the end of 2022, down 4.9%, or $2.3T, from a record high of $47.7 trillion in June. This is the largest June-to-December drop in percentage terms since 2008.

• The median U.S. home sale price was $383,249 in January, down 11.5% from a peak of $433,133 in May, and up just 1.5% from January 2022.

Room To Spare. Total value of U.S. homes was slightly above $30 trillion at the start of 2020 which means that home values would need to fall another 33% just to return to pre-pandemic levels.

• Redfin Economics Research Lead Chen Zhao noted in the release “The total value of U.S. homes remains roughly $13 trillion higher than it was in February 2020, the month before the coronavirus was declared a pandemic.”

Biggest Loser. San Fran took the top spot with the total value of homes falling 6.7% year over year to $517.5 billion in December.

• Rounding out the top three were two other bay area metros. Oakland home values are down 4.5% and San Jose was down 3.2%.

• Only three other metro areas were in the red in December; New York (-1.0%), Seattle (-0.4%), and Boise (-0.3%).

Biden Admin Announces Lower MIP on FHA

The Federal Housing Administration announced a reduction to its annual mortgage insurance premium by 0.30 percentage points, from 0.85% to 0.55% for most new borrowers.

• What is Mortgage Insurance? Mortgage insurance does exactly as it sounds. It is an insurance policy (in case of default) for the mortgage company that is paid by the borrower.
• How Much Savings? It is not a life-changing amount of money but the average family buying a home with a $300,000 mortgage will save about $900 per year.

The White House noted in their press release that over the last several years, FHA’s mortgage insurance fund has accumulated reserves at a level that is more than five times the required threshold set by Congress. With FHA-insured mortgages accounting for just 7.5% of home sales in the third quarter of 2022, there is clearly room to grow.