Mortgage Applications Sink To Lowest In 25 Years As Rates Creep Up

As the average 30-year fixed-rate mortgage rate rose to 6.48% from 6.42% in the last week of 2022, mortgage applications sunk to a 25-year low, according to officials at Freddie Mac. 

“Mortgage application activity sunk to a quarter-century low this week as high mortgage rates continue to weaken the housing market,” said Sam Khater, Freddie Mac’s Chief Economist. “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.”

Khater continued, “Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of Millennial renters will provide support to the purchase market. Moreover, if rates continue to decline, borrowers who purchased in the last year will have opportunities to refinance into lower rates.”

A year ago at this time, the 30-year FRM averaged 3.22%.

The 15-year fixed-rate mortgage is now averaging 5.73%, up from last week when it averaged 5.68%. A year ago at this time, the 15-year FRM averaged 2.43%.

Nadia Evangelou, senior economist and director of real estate research, said with the qualifying income for an average home near the $100,000 threshold, only 32% of all households and 15% of all renters can currently afford to buy a median-priced home.

“Most of these eligible households are Gen Xers as their median age is 51, they are married couples (73%), they have earned at least a bachelor’s degree or higher educational attainment (61%), and most of them live in the big city centers such as New York, Los Angeles, and Chicago where housing is even more expensive,” Evangelou said in a statement.

Evangelou said there are disparities between races and Black Americans may fall further behind on homeownership in 2023.

“Looking at affordability conditions by race or ethnic group, nearly half of Asian Americans can afford a median-priced home, followed by White Americans (35%). In contrast, 24% of Hispanic and less than 20% of Black Americans can accomplish the American Dream,” Evangelou said.

Lenders are taking notice and offering programs to help more people enter the marketplace.

Leaders at Guild Mortgage have partnered with the National Association of Hispanic Real Estate Professionals as part of their commitment to diversity and inclusion.

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