Mortgage demand drops to a 22-year low as higher interest rates and inflation crush homebuyers www.cnbc.com/2022/07/20/mortgage-demand-drops-to-lowest-leve…
Mortgage demand fell more than 6% last week compared with the previous week, hitting the lowest level since 2000, according to the Mortgage Bankers Association’s seasonally adjusted index.
Applications for a mortgage to purchase a home dropped 7% for the week and were 19% lower than the same week in 2021. Buyers have been contending with high prices all year, but with rates almost double what they were in January, they’ve lost considerable purchasing power…
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.82% from 5.74%, with points increasing to 0.65 from 0.59 (including the origination fee) for loans with a 20% down payment. That rate was 3.11% the same week one year ago. Demand for refinances, which are highly rate sensitive, fell 4% for the week and were 80% lower than the same week last year.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.82% from 5.74%, with points increasing to 0.65 from 0.59 (including the origination fee) for loans with a 20% down payment. That rate was 3.11% the same week one year ago. Demand for refinances, which are highly rate sensitive, fell 4% for the week and were 80% lower than the same week last year.
The really interesting metric is how far housing prices have to decline to give you the same monthly mortgage payment at the current 5.82% rate.
Most people buy based on the monthly payment and what loan they qualify for, not the purchase price.
The really interesting metric is how far housing prices have to decline to give you the same monthly mortgage payment at the current 5.82% rate.
I used a mortgage calculator for a $400K home, and the monthly payment now would be $2165 as opposed to $1650 a year ago. To keep the payment approximately the same would involve a $300K price.
I used a mortgage calculator for a $400K home, and the monthly payment now would be $2165 as opposed to $1650 a year ago. To keep the payment approximately the same would involve a $300K price.
They can always use the dodge the auto industry has used to enable it’s ever higher prices: stretch out the length of the finance contract. Cars used to be financed for 3 years. Average financing term is now over 70 months, with contracts up to 84 months available. That is what has enabled the auto industry’s continuous price inflation. Average new car transaction price in the US is now about $45,000.
The house I grew up in in Kazoo was built in 58. It’s still standing. The house my parents bought in Dearborn in 1950 still stands too. If the asset has a life of 60-70 years, or more, why not finance it for 50-60 years? A 40 year old person buys a house on a 60 year contract, then kicks the bucket at age 90. The bank takes the house back, after collecting 90% of the price of it, then resells it at a price after 60 years of inflation. What’s not to like?