On the Mortgage Front
Freddie Mac (OTCMKTS:FMCC) reported the 30-year fixed-rate mortgage averaged 6.33% as of Jan. 12, down from last week when it averaged 6.48% A year ago at this time, the 30-year FRM averaged 3.45%. The 15-year fixed-rate mortgage averaged 5.52%, down from last week when it averaged 5.73%. A year ago at this time, the 15-year FRM averaged 2.62%.
“While mortgage rates have resumed their decline, the market remains hypersensitive to rate movements, with purchase demand experiencing large swings relative to small changes in rates,” said Sam Khater, Freddie Mac’s chief economist. “Over the last few weeks latent demand has been on display with buyers jumping in and out of the market as rates move.”
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The Mortgage Bankers Association (MBA) reported its Market Composite Index, a measure of mortgage loan application volume, increased 1.2% on a seasonally adjusted basis for the week ending Jan. 6 from one week earlier, while the unadjusted index increased 48% compared with the previous week.
The seasonally adjusted Purchase Index dipped 1% from one week earlier and the unadjusted index soared 47% compared with the previous week, although it was also 44% lower than the same week one year ago. The Refinance Index increased 5% from the previous week and was 86% lower than the same week one year ago.
“Purchase applications continued to be hampered by broader weakness in the housing market and declined slightly over the week, with the index slipping to its lowest level since 2014,” said Joel Kan, MBA’s vice president and deputy chief economist. “There was an increase in refinance activity as a result of the 16-basis-point decline in rates, as both conventional and government refinance applications increased.
However, the overall pace of refinance applications was lower than November and December’s 2022 averages, and over 80% lower than a year ago. Refinances were about 30% of all applications last week — well below the past decade’s average of 58%.”
On The Homeownership Front
The U.S. housing market closed 2022 with inventory and time on market increasing and listing price growth moderating, according to the latest Realtor.com Monthly Housing Trends Report.
Nationally, the active inventory of homes for sale grew 54.7% year-over-year in December, but was below pre-pandemic levels (-38.2% compared to the December 2017-2019 average). Both newly-listed homes (-21%) and pending listings, or homes under contract with a buyer (-36.8%), declined year-over-year.
Among the 50 largest U.S. metros, 49 markets posted yearly active inventory gains in December, led by Raleigh, North Carolina (+226.2%). Only Hartford, Connecticut (-7.7%), saw a year-over-year decline in the number of for-sale homes.
“In December, we saw both buyers and sellers pulling back as they continue to adjust to a challenging market,” said Danielle Hale, chief economist for Realtor.com. “Buyers started 2022 facing high home prices and limited inventories, and ended the year with interest rates roughly double where they started.
Despite significant cooling in sales in 2022, some indicators remain in high gear. Prices are still significantly higher and homes are selling faster compared to 2019 pre-pandemic levels.
Hale added housing demand cooled from the previous year, which resulted in “pushing home price growth into single-digit territory for the first time in 12 months, moderation in home price growth may encourage more buyers to return to the market in the months ahead, and may also be welcome news for sellers aiming to sell and buy at the same time.
Affordability will remain a challenge and buyers will want to keep a close eye on their potential mortgage payment – a mortgage calculator is a great way to do this.”
Realtor.com is operated by the News Corp (NASDAQ:NWS) (NASDAQ:NWSA) subsidiary Move Inc.
Looking ahead into 2023, Zillow Group (NASDAQ:Z) (NASDAQ:ZG) predicted Charlotte, North Carolina, will be the year's hottest housing market. Rounding out the forecasted top 10 housing markets are Cleveland, Pittsburgh, Dallas, Nashville, Jacksonville, Kansas City, Miami,
Atlanta and Philadelphia.
“This year's hottest markets will feel much chillier than they did a year ago” said Anushna Prakash, economic data analyst at Zillow. "The desire to move hasn't changed, but both buyers and sellers are frozen in place by higher mortgage rates, slowing the housing market to a crawl. Markets that offer relative affordability and room to grow are poised to stand out, especially given the prevalence of remote work.”
Zillow analyzed the 50 largest metro areas for its forecast – seven were excluded due to missing data – and the final call was based on expected home value appreciation from December 2022 through November 2023, the anticipated change in home value appreciation from 2022, new jobs per new housing unit permitted, an estimate of the net new number of home-owning households based on current demographic trends, and the speed at which homes are being sold.
