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Good & Bad News On Mortgages

First the good news on the real estate front

Homebuyer demand is rising as mortgage rates continue to decline, according to a new Redfin report. 

On Dec. 1, daily rates fell to 6.29% according to the report, a full percentage point lower than the 7.29% peak last month. With that drop, Redfin found mortgage-purchase applications grew 4% from the previous week. Meanwhile, Redfin’s Home Buyer Demand Index, which measures requests for tours and other services, rose 1.5% from last month. 

Those changes in rates and demand are keeping some sellers from dropping prices as they had been recently. In the four weeks ended Nov. 27, just over 6% of homes listed had a price drop — down 7.2% from the previous week. 

While this is all good news for the housing market, Redfin deputy chief economist Taylor Marr says we’re still not out of the woods. Key indicators of homebuying demand will likely be teetering on a knife’s edge with every data release that comes out related to the Fed’s path to eventually bringing rates down,” Marr said. “We’re likely past peak inflation, past peak mortgage rates and past the bottom for mortgage purchase applications. But there’s further cooling ahead for the housing market, as sales and prices have further to fall before buyers and sellers become comfortable with homebuying costs again.”

Home Prices are falling

According to the report, in 10 of the 50 most populous metros, home prices are falling from last year. They include an 8.2% year-over-year drop in San Francisco, 2.8% in San Jose, California, 2.7% in Pittsburgh, 2.3% in Detroit, 1.7% in Sacramento and 1.3% in Austin. Chicago, San Diego, Los Angeles and Philadelphia had declines of less than 1%. 

The declines in Austin and Los Angeles represent the first year-over-year decreases since mid-2019. In Chicago, it’s the first time prices fell since June 2020. 

During the four weeks ended Nov. 27, Redfin’s Homebuyer Demand index increased — up 1.5% from the previous month but down 20% from the year-ago period. 

Boston condo mortgage rate

Thirty-year mortgage rates fell to 6.49% in the week ending Dec. 1, while mortgage applications rose 4% week over week during the week ended Nov. 25, despite purchase applications falling 41% from 2021. The lower rate brought the average monthly mortgage payment on a median-priced home to $2,342, down slightly from the previous week and down 8% from three weeks prior, when mortgage rates were 7.08%. 

Bad News on Pending Home Sales

Pending home sales fell 35.5% from last year, marking the largest decline since January 2015.

Google “homes for sale” searches are down

Redfin found fewer Google searches for “homes for sale” during the week ended Nov. 26, down 40% from last year. 

In the four weeks ended Nov. 27, active listings rose 12.9% from last year. Meanwhile, new listings fell 21% from last year, one of the largest declines since May 2020.

Median residential asking price

The median asking price rose 4.8% from 2021 to $359,725, the slowest annual growth since the pandemic began. Meanwhile, the median sale price increased 2.4% year over year to $357,073, up just slightly from the week before, according to the report.

​​Thirty-two percent of homes that went under contract had an offer within the first two weeks, showing little change from the previous four weeks but down from 40% last year. Twenty-five percent of homes sold above list price, down from 42% last year and the lowest percentage since June 2020.

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Boston Real Estate Borrowers are clearly used to hearing that mortgage rates were low last week’s rates didn’t disappoint.

  • Mortgage application volume fell 2.5% last week from the previous week, according to the Mortgage Bankers Association.
  • Mortgage applications to purchase a home fell 5% last week.
  • Applications to refinance a home loan fell 1% for the week, despite the lowest interest rates since February.

Lower mortgage rates are not prompting homeowners or potential homebuyers to contact their lenders, as other obstacles stand in their way.

Boston Real Estate Mortgage Bad News

Total mortgage application volume fell 2.5% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The decline came even though the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.17% from 3.20%, with points decreasing to 0.30 from 0.36 (including the origination fee) for loans with a 20% down payment. That is the lowest rate since the end of February.

Applications to refinance a home loan, which are highly sensitive to weekly rate moves, still fell 1% for the week and were 18% lower than one year ago. The rate on the 30-year fixed was 26 basis points higher a year ago, but rates were at record lows last fall, far lower than the current rate.

“Even with a few weeks of lower rates, most borrowers have likely already refinanced, which is why activity has decreased in seven of the last eight weeks,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Mortgage applications to purchase a home fell 5% for the week and were 34% higher than a year ago. The annual comparison, however, means little now because the housing market ground to a halt at this time last year, when the pandemic lockdown was in place. It then rebounded dramatically in the summer and is only now beginning to lose steam again.

Homebuyers are butting up against bidding wars in the competition for the record-low supply of homes for sale. That is causing home prices to skyrocket at the fastest pace in 15 years. Even today’s slightly lower interest rates are not enough to make up for the ever-increasing cost of buying a home. Purchase applications have fallen for four of the last five weeks.

“While buyers were eager in early 2021, sellers have been holding back,” said Danielle Hale, chief economist for realtor.com. “We’ve seen 200,000 fewer new sellers than we would typically see in January and February and an additional 117,000 new sellers were missing compared to the typical year in March. These trends have resulted in extraordinarily frustrating trends for buyers, especially first-timers.”

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Bad News

The volume of applications for mortgages decreased 0.7% for the week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 decreased to 3% from 3.01%, with points decreasing to 0.32 from 0.37 (including the origination fee) for loans with a 20% down payment.

Applications to refinance a home, which are most sensitive to weekly interest rate movements, fell 0.3% for the week but were 44% higher than a year ago. While that annual comparison may seem like a lot, it had been around 100% higher earlier this year. The new record low was also such a tiny move that it clearly had little impact.

Boston Real Estate  

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