Real estate beat: Mortgage rates remain high, profit margins on home sales are down

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Mortgage rates remained high this week, while pending home sales continued to decline and mortgage default rates also saw downward movement.

On the mortgage front: According to the latest data from Freddie Mac FMCC, the 30-year fixed-rate mortgage averaged 5.1% for the week ending April 28, down slightly from 5.11% last week. The 15-year fixed-rate mortgage averaged 4.4%, down from 4.38% last week. And the five-year Treasury-indexed variable-rate hybrid mortgage averaged 3.78%, down from 3.75% last week.

“The combination of rapidly growing house prices and the fastest rising mortgage rates in more than 40 years is finally affecting buying demand,” said Sam KhaterFreddie Mac’s chief economist.

“Homebuyers navigating the current environment are adapting in a variety of ways, including switching to variable rate mortgages, moving away from expensive coastal towns and into more affordable suburbs. We expect lower demand to slow house price growth to a more sustainable pace later this year. »

While mortgage rates remained high, applications continued to decline. the Mortgage Bankers Association (MBA) The composite market index, a measure of the volume of mortgage applications, fell 8.3% for the week ending April 22, with the buy index falling 8% from a week earlier. to the other and the refinancing index of 9% – the latter was also 71% lower than the same week a year ago.

Joel Can, MBA’s associate vice president of economic and industry forecasting, noted that overall mortgage application activity fell to its lowest level since 2018 while adding, “Potential homebuyers have pulled back this spring as they continue to face limited options of homes for sale as well as higher costs. rising mortgage rates and prices. The recent decline in purchase requests is an indication of potential weakness in home sales in the months ahead.

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On the home buying front: In fact, weakness occurs sooner rather than later. the National Association of Realtors (NAR) reported that pending home sales fell in March, marking the fifth consecutive month of declining contract activity.

NAR’s pending home sales index fell 1.2% to 103.7 in March, while year-over-year activity fell 8.2%. An index of 100 equals the level of contractual activity in 2001.

“The decline in contract signings implies that multiple offers will soon dissipate and be replaced by much calmer and normalized market conditions,” said Lawrence YunChief Economist of NAR.

“As things stand, sudden and large increases in mortgage rates have reduced the pool of eligible buyers, which in turn has reduced buying activity. The aspiration to buy a house remains, but financial capacity has become a major limiting factor.

A further weakening was recorded by the brokerage red fin RDFN, which found that 65% of property offers written by its agents faced competition on a seasonally adjusted basis in March, down from a revised rate of 66.7% in February. This was the first month-over-month decline since September.

“Most homebuyers are still facing bidding wars, but competition is starting to cool off as soaring mortgage rates and home prices cause some Americans to back off or put purchase plans on hold,” said Redfin’s chief economist. Daryl Fairweather.

On the door-to-door sales front: According to new data from ATTOM. This is the first quarterly decline since late 2019 and the largest in a decade.

The sale of a typical single-family home generated gross profit of $103,000 in the first quarter, down from $107,187 in the fourth quarter of last year, but also much higher than the $75,001 recorded there. a year ago.

“Home prices simply cannot continue to rise as rapidly as they have in recent years,” said Rick Sharga, Executive Vice President of Market Intelligence for ATTOM. “The combination of higher prices, rising mortgage rates and the highest inflation rates in 40 years could shut some potential buyers out of the market, which means we could start to see weaker sales numbers.” appreciation should slow, and we may even see modest price corrections in some markets.”

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On the mortgage delinquency front: As for homeowners having difficulty repaying their mortgage, new data from Dark Knight Inc. BKI determined that the national crime rate fell by more than half a percentage point in March to 2.84%, the lowest level since the 3.22% level set in January 2020.

Serious delinquencies – defined as being 90 days or more overdue but not in foreclosure – fell 12% for the biggest one-month improvement in 20 years, although they were also 70% above pre -pandemics. Nevertheless, foreclosure housing starts are down 3% from the previous month and are below pre-pandemic levels

Among the states, Mississippi has the highest share of non-current mortgages at 6.21% and Washington State the lowest at 1.7%.

Photo: Mohammad Hassan/Pixabay.

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