WASHINGTON–The lowest mortgage rates the market has seen in six months has more home shoppers back in the market, but the same can’t be said for those who already own homes and who might previously have considered selling, according to a new report.
As the Wall Street Journal pointed out, home sales in 2023 are on track to be the lowest since 2011. But in recent weeks mortgage rates have retreated from nearly 8% to below 7%, which has led to mortgage applications increasing for six straight weeks on a seasonally adjusted basis (although they are still down where they were from one year ago, according to Mortgage Bankers Association data).
All of that means credit unions could see strong interest from members and prospective members in mortgages after the holidays, according to real estate agents interviewed by the Journal. But there will likely also be plenty of frustration voiced by would-be borrowers, the report added.
‘Pent-Up Demand’
“There’s just a lot of pent-up demand,” Lisa Sturtevant, chief economist at Bright MLS, a real-estate listings database that covers parts of six eastern states and Washington, D.C., told the Journal. “There’s a lot of people out there who are still waiting to get into the market, and they’re making it work however they can.”
According to the Journal, home-buying affordability, which hit the worst level in decades this fall, is improving. The typical housing payment for a buyer purchasing a median-priced home with a 20% down payment was $2,503 in the four weeks ended Dec. 10, the lowest level since April, data from Redfin indicate.
Growing Appetite
“That buying appetite is poised to grow further owing to the recent retreat in mortgage rates,” the Journal added. “According to Freddie Mac, the average rate on a 30-year fixed mortgage has declined for seven straight weeks, falling to 6.95% as of Dec. 14 after hitting a two-decade high of 7.79% in October.
But as many credit union lending officers know all too well, the Journal also reminded “the most significant constraint is the shortage of homes on the market. Many homeowners who locked in low mortgage rates in recent years are unwilling to give up those loans to take on a different mortgage at a significantly higher cost.”
‘Can’t Let Go’
The report added that after a boom in home purchases and refinancings when rates were near a bottom, more than 32 million homeowners have mortgage rates below 4%, according to Intercontinental Exchange.
“Homeowners’ unwillingness to sell their homes because they don’t want to let go of their low mortgage rates is keeping home prices near record highs,” the Journal reported. “Mortgage rates would need to fall another percentage point or more to entice many homeowners to sell, economists and real-estate agents say.”
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