Lower mortgage rates, higher sales increase demand for home loans

Like its competitors, Tennessee-based First Community Mortgage, Inc. (FCM) reduced the size of the company in 2022 amid a difficult mortgage market. In early 2023, the company is funding the training of sales team in ways to start growing the business again. Surprisingly, the landscape is helping.

“There is definitely hope in the air as mortgage applications are starting to come in,” said Keith Canter, CEO of First Community Mortgage. two: one, we’ve seen an interesting trend in rates, moving lower in the last few weeks; and two, more and more houses are accumulating in the data, so we’re seeing sales people are willing to work with customers.

Altos Research records confirm Canter’s theory that there are many buildings in the records. The weekly list rose from 471,349 to 472,688 from January 6 to January 13.

Currently, a Mortgage Bankers Association (MBA) report covering 75% of all US commercial and residential markets shows the rapid increase in the demand for loans. The Market Composite Index, a measure of the number of mortgage applications, rose 27.9% on an annual adjusted basis for the week ending January 13 compared to the previous week.

“Mortgage rates are now at their lowest level since September 2022, and are about a percentage point below the mortgage peak last fall,” said Mike Fratantoni. , MBA’s senior vice president and chief economist, in a statement. “As we enter the early spring buying season, lower mortgage rates and more homes on the market will help support the potential for first-time home buyers.”

After peaking at 7.36% on October 20, mortgage rates is below 6%, according to various statistics.

MBA measured the 30-year fixed rate for compliance loan balances ($726,200 or less), which decreased to 6.23% this week from 6.42% last week. Jumbo loans (over $726,200) increased from 6.09% to 6.08% during the same period. Prices were much lower at Mortgage News Dailymark 6.17% on Wednesday morning for loan settlement.

Use of information

Lenders are taking advantage of refinancing this week amid low rates. MBA data shows that demand for the product increased by 34% this week compared to last week. Meanwhile, retail sales had a 25% increase over the same period.

Despite these gains, project financing remains more than 80% below last year’s pace and total sales of remains 35% below the level from last year.

According to Logan Mohtashami, lead researcher at HousingWireThis affects mortgage data since the market is coming off a period of low volume.

“So, you can see some crazy moves in the MBA index that had a dive in 2022,” said Mohtashami.

As for the refinancing, which dried up last year amid the rate hikes, analysts say demand is recovering.

“People want more income, so they’re not thinking too far ahead about whether prices will drop further,” Mohtashami said. “If prices drop more, they’ll refinance.”

Mortgage refinancing applications rose to 31.2% of total applications this week from 30.7% last week.

What to expect

For Canter, the mortgage market is not “out of the woods,” despite the favorable landscape at the beginning of 2023, because there is no guarantee that it will remain free in the current situation .

“The Federal Reserve will take the gas out of the short-term rate hike, but there is no guarantee. So, we have interest rates,” Canter said. “And the demand outside will create a floor on how far home prices can fall. Builders are slowing down the number of homes they’re building, which will add more of incentives in research.

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