Mortgage demand will increase regardless of risky rates of interest
Despite some volatility in mortgage rates, mortgage demand rose for the second straight week.
According to the Mortgage Bankers Association’s seasonally adjusted index, overall application volume rose 6.5% last week compared to the previous week.
The average contract rate for 30-year fixed-rate mortgages with matching loan balances ($726,200 or less) fell from 6.79% to 6.71%, with points from 0.80 to 0.79 (including the setup fee) for loans with a decline 20% fell payment.
That was average, but mortgage rates were significantly higher for most of the week before falling sharply on Friday following news of Silicon Valley Bank’s bankruptcy.
Although interest rates were higher, homebuyer applications for the week were up 7% but still 38% lower than the same week a year ago. Home buying virtually ground to a halt in early February after rates rose a full percentage point, but they appear to be bouncing back now, perhaps because buyers are concerned rates will rise even higher. The question is how long will that take?
“It always happens when interest rates go up, and it only lasts a couple of weeks,” said John Burns of John Burns Real Estate Consulting, who said he saw new-build home sales pick up in February despite higher interest rates.
Lennar, the second-biggest home builder in the country, released better-than-expected earnings on Tuesday, and company chairman Stuart Miller said in the press release:
“Homebuyers are considering the possibility that today’s interest rate environment could be the new normal. Accordingly, the housing market continues to change as increasing household and family formation continues to drive demand against a chronic supply shortage.”
Applications for home loan refinance were up 5% from the previous week but were down 74% from a year ago.
Mortgage rates fell further on Monday, according to a separate survey by Mortgage News Daily, but rose again on Tuesday following the release of the February CPI, suggesting the Federal Reserve could hike rates again next week despite the recent turmoil in the banking sector .
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