Has the housing market hit bottom?
Home sales fell during the last 11 months of 2022, but now comes a sign that things might be looking up.
Mortgage-loan applications jumped a seasonally-adjusted 7.4% in the week ended Feb. 3 from a week earlier, according to the Mortgage Bankers Association. The increase was 8% unadjusted, but applications were still down 58% from a year earlier.
The recent slide of mortgage rates helped boost loan demand.
“Applications rose last week, as the 30-year-fixed-mortgage rate inched lower to 6.18%, its fifth consecutive weekly decline,” said MBA economist Joel Kan.
“The 30-year fixed rate is almost a percentage point below its recent high of 7.16% in October 2022.”
Refinancing Applications Rise Sharply
Refinancing applications saw a stronger gain than purchase applications. The former surged 18% from a week earlier, though they were still down 75% from a year ago.
Unadjusted purchase applications climbed 4% from the previous week but were down 37% from a year earlier.
The refinancing share of mortgage activity increased to 33.9% of total applications from 31.2% the previous week.
“Both purchase and refinance applications have shown gains in three of the past four weeks because of lower rates,” Kan said.
To be sure, he noted the plunge in overall mortgage applications over the past year and the sharp increase in mortgage rates from a year earlier. The 6.18% 30-year fixed rate is up from about 3.55% a year ago.
Kan Sees ‘Step in the Right Direction’
Still, “this week’s results are a step in the right direction,” Kan said. “Purchase activity that was put on hold last year due to the quick runup in rates is gradually coming back. ... Housing demand remains strong, driven by supportive demographics and the ongoing strength in the job market.”
Meanwhile, the average loan size for purchase applications in the latest week totaled $428,500, the highest amount since May.
“This increase is a sign that the recent upward trend in purchase activity remains skewed toward larger loan sizes and less first-time homebuyer activity, as entry-level housing remains undersupplied, and buyers struggle with affordability in many markets.”
It’s no wonder that affordability is a problem. In addition to the runup in interest rates since last March, the median home-sale price soared 43% to $467,700 in the fourth quarter from $327,100 in the fourth quarter of 2019, prior to the covid pandemic, according to the government.
So where do we go from here? For anyone who’s not wealthy, things don’t look that bright. Home prices haven’t fallen that much.
The median existing-home sales price slid 11% to $366,900 in December from the record high $413,800 in June, according to the National Association of Realtors. But the latest figure still represents a 2.3% increase from December 2021.
If you were to purchase a $350,000 house, with a $70,000 down payment, your monthly payment for a 6.18% 30-year fixed mortgage would be $2,007.
Thus many of us simply aren’t in a financial position to buy a new home.
TheStreet wants you to invest wisely in this volatile market. Our wealth-building investment and stock trading subscriptions help grow portfolios at all investing levels.
