A sign is posted for a home for sale on July 14, 2022 in San Francisco, California. The number of homes for sale in the US rose 2 percent in June for the first time since 2019.
Justin Sullivan | Getty Images
Demand for mortgages, which has seen four consecutive months of declines, fell last week to its lowest level since 1997, as interest rates continued to rise.
Homebuyer demand for mortgages fell 4% for the week and was 38% lower than the same week a year ago, according to the Mortgage Bankers Association. Home loan refinancing applications were down 7% from the previous week, seasonally adjusted. Demand was 86% lower than the same week a year ago.
The number of borrowers that can benefit from refinancing is at an all-time low. Interest rates were so low during the first two years of the Covid pandemic that the vast majority of borrowers with higher rates have already refinanced.
The average contract rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) rose to 6.94% from 6.81%, with points dropping to 0.95 from 0.97 (including the origination fee). ) for loans with a 20% discount payment. That is the highest percentage since 2002 on the MBA index.
“The speed and level to which rates have risen this year have greatly reduced refinancing activity and exacerbated existing affordability problems in the procurement market,” Joel Kan, an MBA economist, said in a release Wednesday. “Residential building activity, ranging from new home start-ups to home sales, is on a downward trend that has coincided with the rise in rates.”
As potential home buyers struggle to afford a home given higher interest rates and still high home prices, more people are now turning to adjustable-rate loans, which offer lower rates. ARM stock rose to 12.8% of all applications last week, its highest share since March 2008.
Mortgage rates rose even higher this week, with a new reading from Mortgage News Daily pinning the 30-year-old at 7.15% on Tuesday.
Higher rates and falling buyer demand caused homebuilder sentiment to fall again on the National Association of Home Builders index. Builders’ sentiment, now well into the negative range, is half what it was just six months ago.