Mortgage rates drop even lower to new record
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For the week of: January 11, 2021
MARKET RECAP
Mortgage rates drop even lower to new record
The average U.S. mortgage rate fell to the lowest rate in the Freddie Mac’s Primary Mortgage Market Survey’s near 50-year history.
Despite a decline in rates over the past year, housing affordability is slipping as these low rates have been offset by rising home prices, according to Sam Khater, Freddie Mac’s chief economist.
“The forces behind the drop in rates have been shifting over the last few months and rates are poised to rise modestly this year. The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential homebuyers during the spring home sales season,” Khater said.
This year’s record low rates may be setting a new norm.
Len Kiefer, Freddie Mac‘s deputy chief economist, noted every decade since the 1980s experienced a drop decade-over-decade.
“Even just a year ago, that didn’t seem probable, and it’s certainly not my baseline forecast, but we’d have to acknowledge that there is a chance rates could continue their secular decline,” Kiefer said.
However, news of Democrats having won control of the Senate has some economists shifting gears.
The prospects of increased spending and deficits will likely put upward pressure on mortgage rates as the year progresses, said Mortgage Bankers Association Chief Economist Mike Fratantoni. In turn, Fratantoni estimates the massive refinance wave lenders have been riding may be cut short.
Source: HousingWire | Alex Roha
Looking Ahead: Upcoming Key Market Dates
Wednesday, January 13, 2021Federal BudgetFriday, January 15, 2021Consumer Sentiment Index (Preliminary)
Homebuyer demand for mortgages eases to end a record-breaking 2020
What was expected to be a mundane year in the mortgage market was anything but: A sharp downturn in demand for housing at the start of the pandemic took a hairpin turn and just kept rising.
Mortgage demand ended the year significantly higher than 2019, but appears to be cooling off a bit. Total mortgage application volume rose 0.8%, according to the Mortgage Bankers Association’s seasonally adjusted index.
Low rates continue to fuel refinance volume, which rose 4% for the week and was a stunning 124% higher than a year ago. The refinance share of mortgage activity increased to 74.8% of total applications from 72.7% the previous week.
“Increase in refinance applications was driven by FHA and VA activity, while conventional refinances saw a slight decline,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Mortgage applications to purchase a home fell 5% for the week but were 26% higher than a year ago. That is the second decrease in three weeks, as potential buyers run up against a severe housing shortage and fast-rising prices. The supply of homes for sale at the end of November fell to a record low, according to a report from the National Association of Realtors.
The average loan balance for purchase applications last week set another record high at $376,800. That’s because the bulk of the sales activity is on the higher end of the market, where supply is more plentiful. The low end is seeing the weakest supply and the strongest price gains, hurting affordability.
“There are still signs of relative strength in the housing market as 2020 ends. However, housing affordability will be worth monitoring next year,” Kan said.
Source: CNBC | Diana Olick
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