Mortgage Rates Top 6%, But Can Homebuyers Get A Bargain Soon...| MENAFN.COM

Wednesday, 05 October 2022 06:26 GMT

Mortgage Rates Top 6%, But Can Homebuyers Get A Bargain Soon?


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Mortgage rates passed the 6% mark for the first time in 12 years – and while mortgage applications continue to be in decline, it is possible that homebuyers can get a bargain in two weeks from today.

Table of Contents show
  • 1. On The Mortgage Front
  • 2. On The Homebuying Front
  • 3. On The Homebuilding Front
On The Mortgage Front

Freddie Mac (OTCMKTS:FMCC) reported the 30-year fixed-rate mortgage averaged 6.02% as of Sept. 15, up from last week's 5.89% average – one year ago at this time, the average was 2.86%.

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The 15-year fixed-rate mortgage averaged 5.21%, up from last week's 5.16%. And the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.93%, up from last week's 4.64%.

“Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding 6% for the first time since late 2008,” said Sam Khater, Freddie Mac's chief economist.

“Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.”

The spike in mortgage rates was mirrored by the decline in mortgage applications for the sixth consecutive week. The Mortgage Bankers Association's Market Composite Index was down by 1.2% for the week ending Sept. 9 while the Refinance Index decreased by 4% and was also 83% lower than the same week one year ago.

“Higher mortgage rates have pushed refinance activity down more than 80% from last year and have contributed to more homebuyers staying on the sidelines,” said Joel Kan, MBA associate vice president of economic and industry forecasting.

Government loans, which tend to be favored by first-time buyers, bucked this trend and increased over the week, driven mainly by VA and USDA lending activity.”

The MBA also reported that mortgage credit availability decreased in August, according to the organization's Mortgage Credit Availability Index (MCAI). The MCAI fell by 0.5% to 108.3 last month – the index was benchmarked to 100 in March 2012.

“Slightly offsetting these trends, however, was a small increase last month in new HELOC products,” said Kan.“With aggregate home equity still at elevated levels, HELOCs could benefit borrowers who might not want to give up on their current, low mortgage rate but do want to utilize their home equity to support other spending plans.”

On The Homebuying Front

Realtor.com released its fourth annual Best Time to Buy Report and found the best time to buy a home is the week of Sept. 25 to Oct. 1. According to the company, this particular week will offer lower prices (an average of 5.2% of homes have price reductions during this period), more inventory to choose from and less competition from other buyers.

'After several years of an overheated housing market, higher mortgage rates are helping usher in more regular seasonal trends, which have pros and cons for home shoppers,' said Danielle Hale, chief economist at Realtor.com.

'If you're flexible on your timing and can budget for higher rates, early fall can be a great time to secure a home, with a number of factors aligning to make it the best time of the year both in terms of price and competition. This is especially true for first-time buyers and others who are not trying to sell a home at the same time as their purchase.'

Realtor.com is operated by the News Corp (NASDAQ:NWS, NWSA) subsidiary Move, Inc. For more information, visit Realtor.com.

On The Homebuilding Front

Many Americans have a penchant for living dangerously – or, to be more specific, for living in places endangered by natural disasters.

A new report from Redfin (NASDAQ:RDFN) found 55% of homes built so far this decade face fire risk, while 45% face drought risk. By comparison, just 14% of homes built from 1900 to 1959 faced fire risk and 37% faced drought risk. New homes are also more likely than older homes to face heat and flood risk, but the gap is largest when it comes to fire and drought.

“The areas that are already built are at lower risk of wildfire because they're not surrounded by forest and trees – they're surrounded by other buildings,” said economist Jenny Schuetz.“We have to build new housing farther and farther out from downtown areas because the easy-to-use land has been built out and it's often difficult to add more housing in the urban core.”

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