Mortgage refis are slowing. Here’s why

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Weekly mortgage demand stalls, as rates jump to highest level since June

CNBC 13 October, 2021 - 01:16pm

Mortgage rates continued their trudge higher last week, leaving most homeowners with little to no incentive to refinance. Homebuyers, already battling a pricey market, lost more purchasing power due to those higher rates.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.18% from 3.14%, with points rising to 0.37 from 0.35 (including the origination fee) for loans with a 20% down payment. That is the highest rate since June of this year. Rates are up 15 basis points in the past month.

As a result, mortgage application volume was essentially flat last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.

Applications to refinance a home loan fell 1% for the week and were 16% lower than the same week one year ago. The refinance share of mortgage activity decreased to 63.9% of total applications from 64.5% the previous week.

"Government refinance applications fell over 3% last week, driven by a decline in FHA refinances and an 8-basis-point increase in the average FHA mortgage rate. We continue to expect weakening refinance activity as rates move higher and borrowers see less of a rate incentive," said Joel Kan, an MBA economist.

Mortgage applications to purchase a home increased 2% for the week but were 10% lower compared with the same week one year ago. The rise was driven by a gain in conventional purchase applications, which kept the average loan size elevated, according to Kan. That shows that the bulk of the activity in the housing market continues to be on the higher end, not the entry level. Supply is particularly tight at the lower end, but that is where demand is highest. As a result, prices are seeing the biggest gains where they are least welcome.

Mortgage rates continued to rise this week, suggesting that mortgage demand could weaken over the coming months. The housing market is on the cusp of its slowest season, and without any improvement in affordability, buyers may pull back even further.

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Refinance Rates Today, Oct. 13| Rates falling

The Mortgage Reports 13 October, 2021 - 01:16pm

Mortgage rates continued their trudge higher last week, leaving most homeowners with little to no incentive to refinance. Homebuyers, already battling a pricey market, lost more purchasing power due to those higher rates.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.18% from 3.14%, with points rising to 0.37 from 0.35 (including the origination fee) for loans with a 20% down payment. That is the highest rate since June of this year. Rates are up 15 basis points in the past month.

As a result, mortgage application volume was essentially flat last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.

Applications to refinance a home loan fell 1% for the week and were 16% lower than the same week one year ago. The refinance share of mortgage activity decreased to 63.9% of total applications from 64.5% the previous week.

"Government refinance applications fell over 3% last week, driven by a decline in FHA refinances and an 8-basis-point increase in the average FHA mortgage rate. We continue to expect weakening refinance activity as rates move higher and borrowers see less of a rate incentive," said Joel Kan, an MBA economist.

Mortgage applications to purchase a home increased 2% for the week but were 10% lower compared with the same week one year ago. The rise was driven by a gain in conventional purchase applications, which kept the average loan size elevated, according to Kan. That shows that the bulk of the activity in the housing market continues to be on the higher end, not the entry level. Supply is particularly tight at the lower end, but that is where demand is highest. As a result, prices are seeing the biggest gains where they are least welcome.

Mortgage rates continued to rise this week, suggesting that mortgage demand could weaken over the coming months. The housing market is on the cusp of its slowest season, and without any improvement in affordability, buyers may pull back even further.

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Sign up for free newsletters and get more CNBC delivered to your inbox

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Data is a real-time snapshot *Data is delayed at least 15 minutes. Global Business and Financial News, Stock Quotes, and Market Data and Analysis.

The best month to buy a home, according to an analysis of 33 million home sales

MarketWatch 13 October, 2021 - 01:16pm

Timing isn’t everything, but it doesn’t hurt either. According to a recent analysis of more than 33 million single family home and condo sales over the past 8 years conducted by ATTOM Data Solutions, a provider of real estate and property data, the best time to close on a house is in October. That’s because the premium — which measures the amount you pay for the house compared to the estimated value of the house — is just 2.9%, which is the lowest of the year. That’s followed closely by November, December and January. (In each month, buyers paid some premium for homes, on average, which ATTOM explains is due to the fact that home prices rose quickly during a lot of the periods analyzed.) As for what day to buy? “The day after Christmas usually offers the biggest price discount as sellers try to woo a smaller pool of homebuyers during the winter months,” says Denny Ceizyk, senior mortgage writer for LendingTree.

Closing in October typically means you got your offer accepted in August or September, explains Holden Lewis, home and mortgage expert at NerdWallet. The reason you get deals then? “The housing market during that late-summer period is like the candy market the day after Halloween. Sellers are unloading products rather than holding out for the best price,” says Lewis. Dr. Lawrence Yun, chief economist of the National Association of Realtors, who adds that some home sellers who needed to sell by the end of the summer but who were unsuccessful get desperate as summer comes to a close. “It’s possible that this person may have already bought a home or they could be temporarily renting at another location with the purpose of getting their kids into a new school coinciding with school opening in late August and early September,” says Yun.

Closing in the winter months, which also offer lower premiums on homes, would mean buying now. Cory Hopkins, manager of economists at Zillow, says buying in the fall traditionally offers patient buyers both selection and bargains. “But make no mistake, in this current market, sellers are still in the driver’s seat, regardless of the season. Sellers who list in October may not see the crowds of buyers lining up at their open house like they may have seen in the spring, but they can still expect to get a strong price for their home even if it takes a few more days to sell,” says Hopkins.

Source: ATTOM Data Solutions

If you’re considering buying now, get serious about it and look at houses in earnest, says Lewis. “In just a few weeks you’re going to be planning for Thanksgiving and end-of-year holidays. Sellers will be, too. Fewer people buy and sell homes during the holiday season because of the distractions. Buyers will have fewer houses to choose from if they wait until Thanksgiving preparations are in full swing,” says Lewis. What’s more, Hopkins says, “Zillow is forecasting home values will continue to grow at a torrid pace over the next year, meaning a home you’re interested in buying today will likely be more expensive next year.”

Something else to consider is how long a house has been on the market. “Buyers should look for long days-on-market to see if a large discount is possible,” says Yun. Homebuyers should also lock their rate in as soon as possible in the loan process, according to Ceizyk. “With inflation pressures building, interest rates are likely to rise which make the monthly payment on homes that continue to rise in value in many parts of the country even less affordable,” says Ceizyk. (Indeed, some 15-year rates near 2% and some 30-year rates below 3%, as you can see here.)

Bottom line: “If you’re looking for a good deal, Thanksgiving through the end of January might be your best bet, because fewer buyers are out there,” says Lewis.

Holiday shopping is starting earlier this year, experts say.

Mortgage Application Volume Barely Budges

Mortgage News Daily 13 October, 2021 - 01:16pm

The volume of mortgage applications ticked up last week for the first time in three weeks, but an uptick was the extent of it. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, increased 0.2 percent on a seasonally adjusted basis from one week earlier and was 0.4 percent higher on an unadjusted basis. Over the previous two weeks the index had lost an aggregate of 8.0 percent.

The Refinance Index decreased 1 percent from the prior week and was 16 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 63.9 percent of total applications from 64.5 percent.

The Purchase Index gained 2 percent week over week on both an adjusted and an unadjusted basis. It was down 10 percent compared to the same week in 2020.

"Mortgage rates reached their highest level since June 2021, but application activity changed little this week. An increase in home purchase applications offset a slight decline in refinances," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The increase in purchase applications was welcome news, but was primarily driven by a 2 percent gain in conventional purchase applications, which kept the average loan size elevated."  

Added Kan, "The 30-year fixed rate reached 3.18 percent last week and has risen 15 basis points over the past month, resulting in an 11 percent drop in refinance applications during this time. Government refinance applications fell over 3 percent last week, driven by a decline in FHA refinances and an 8-basis point increase in the average FHA mortgage rate. We continue to expect weakening refinance activity as rates move higher and borrowers see less of a rate incentive."

The FHA share of total applications decreased to 10.2 percent from 10.5 percent the previous week and the VA and USDA shares dipped 0.1 point to 10.2 percent and 0.4 percent, respectively. The average size of a loan was $341,400, up slightly from $338,900 a week earlier while the average size of a purchase mortgage fell by $1,100 to $409,400.

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with balances at or below the conforming limit of $548,250 increased to 3.18 percent from 3.14 percent, with points rising to 0.37 from 0.35. The effective rate was 3.29 percent.

The rate for jumbo 30-year FRM, loans with balances greater than the conforming limit, was 2 basis points higher at an average of 3.22 percent. Points increased to 0.29 from 0.27 and the effective rate was 3.30 percent.

Thirty-year FRM backed by the FHA had a rate of 3.20 percent, an 8 basis point increase. Points were unchanged at.0.31 and the effective rate grew to 3.29 percent

The average contract interest rate for 15-year fixed-rate mortgages was 2.48 percent with 0.29 point. The prior week the rate was 2.45 percent with 0.24 point. The effective rate was 2.56 percent.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) jumped from 2.54 percent to 3.08 percent, with points increasing to 0.26 from 0.16. The effective rate was 3.17 percent. The ARM share of activity was unchanged at 3.4 percent.

MBA's Weekly Mortgage Applications Survey has been conducted since 1990 and covers over 75 percent of all U.S. retail residential applications Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.

MBA's latest Forbearance and Call Volume Survey reports a 27 basis point decline in the percentage of loans in forbearance. As of October 3, the survey found 2.62 percent of active mortgages in forbearance plans, representing 1.3 million homeowners. Of these loans, 13.3 percent were in the initial forbearance plan stage, 77.5 percent were in a forbearance extension, and 9.2 percent are forbearance re-entries.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased 17 basis points to 1.21 percent. The share of Ginnie Mae (FHA and VA) loans dropped 41 basis points to 2.94 percent, and the forbearance share for portfolio loans and private-label securities (PLS) declined 35 basis points to 6.42 percent. The percentage of forborne loans serviced by independent mortgage bank (IMB) servicers was down 37 basis points relative to the prior week to 2.82 percent, and the percentage of loans in forbearance for depository servicers decreased 24 basis points to 2.69 percent.

"Many borrowers reached the expiration of their forbearance term as we entered October. The pace of exits climbed to the fastest pace in over a year, and the share of loans in forbearance declined at the fastest rate since last October, dropping by 27 basis points. The decline was the largest for Ginnie Mae and portfolio/PLS loans," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "Payment performance has remained steady for those who have exited forbearance and into a workout since 2020, with more than 85 percent of those borrowers current as of October. It also continues to be striking that so many homeowners in forbearance have continued to make their payments. Almost 16 percent of borrowers in forbearance as of October 3rd were current."

Added Fratantoni, "Job growth was weaker than expected in September, reflecting the challenges from the Delta variant, ongoing supply-chain issues, and the resulting slowdowns in workplace and school re-openings. However, the drop in the unemployment rate, rising wages, and abundant job openings will continue to help support the housing market, including helping borrowers exit forbearance successfully in the weeks ahead."

MBA's latest Forbearance and Call Volume Survey covers the period from September 27 through October 3 and represents 73 percent of the first-mortgage servicing market of 36.5 million loans.

Mortgage news and data since 2004

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