Bye, bye refi: Purchase mortgage apps overtake refis

Overall, mortgage applications decreased 0.7% for the week ending Feb. 25

It’s official: the mortgage industry has entered a purchase era, with refinance applications declining below 50% of the mix for the first time since June 2019, the Mortgage Bankers Association (MBA) reported on Wednesday.

Mortgage applications decreased 0.7% for the week ending Feb. 25, as mortgage rates reached 4.15%. Compared to the same week one year ago, applications dropped 41.7%.

The MBA‘s seasonally adjusted refi index increased 0.5% from the previous week, but fell 56.2% year-over-year. Meanwhile, the purchase index dropped 1.7% in one week and 8.6% in one year.

The survey, conducted weekly since 1990, covers over 75% of all U.S. retail residential mortgage applications.

According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, mortgage rates last week reached multi-year highs, “putting a damper on applications activity.”

The trade group estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) increased to 4.15% from 4.06% the week prior. For jumbo mortgage loans (greater than $647,200), rates rose to 3.88% from 3.84% the week prior.

“Refinance share of applications dipped below 50%. Although there was an increase in government refinance applications, higher rates continue to push potential refinance borrowers out of the market,” Kan said in a statement.

The survey showed that the refi share of mortgage activity decreased to 49.9% of total applications last week, from 50.1% the previous week. VA apps rose to 10.2% from 9.9% in the same period.

The FHA share of total applications decreased to 8.6% from 8.7% the prior week. Meanwhile, the adjustable-rate mortgage share of activity increased from 5.1% to 5.3% and the USDA held steady at 0.4%.

Regarding purchase applications, Kan said the activity remained weak amid a strong home-price growth and low inventory. However, a greater share of activity is occurring at the higher end of the market.

Kan added that MBA will continue to assess the potential impact on mortgage demand from the sharp drop in interest rates this week due to Russia’s invasion of Ukraine.

Experts told HousingWire that the turmoil could lower mortgage rates in the U.S. at least in the short-term, because investors often flee to safer options, such as U.S. Treasury notes, bonds and mortgage-backed securities during periods of conflict.

But the Federal Reserve was already balancing efforts to slow inflation without cooling the economy too much by rising rates this year. Experts expect inflation will be exacerbated by the conflict, especially considering sanctions on Russia, an oil-producing nation.

How the Fed thinks about the conflict in Ukraine — how long it may last, the likelihood it will expand beyond the borders of Ukraine, and its impact on the economy — will determine how mortgage rates move in the long term. The Fed will meet again from March 15 to 16, and is expected to raise rates from 0 to 0.25%.

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Retiring at age 65 is no longer feasible, older investors say

By Didier Malagies • 22 Apr, 2024

Retirement at 65 has been a longstanding norm for U.S. workers, but older investors believe that not only is such an outcome unfeasible, but they’re likely to face more challenging retirements than their parents or grandparents. This is according to recently released survey results from Nationwide , with a respondent pool that included 518 financial advisers and professionals, as well as 2,346 investors ages 18 and older with investable assets of $10,000 or more. The survey follows other ongoing research into the baby boomer generation as it approaches “ Peak 65 .” The investors included a subset of 391 “pre-retirees“ between the ages of 55 and 65 who are not retired, along with subsets of 346 single women and 726 married women, Nationwide explained of its methodology. Seven in 10 of the pre-retiree investors said that the norm of retirement at age 65 “doesn’t apply to them,” while 67% of this cohort also believe that their own retirement challenges will outweigh those of preceding generations. Stress is changing the perceptions of retired life, especially for those who are closest to retirement, the results suggest. “Four in 10 (41%) pre-retirees said they would continue working in retirement to supplement their income out of necessity, and more than a quarter (27%) plan to live frugally to fund their retirement goals,” the results explained. “What’s more, pre-retirees say their plans to retire have changed over the last 12 months, with 22% expecting to retire later than planned.” Eric Henderson, president of Nationwide Annuity , said that previous generations who observed a “smooth transition” into retired life do not appear to be translating to the current generation making the same move. “Today’s investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement,” Henderson said in a statement. The result is that more pre-retirees are changing their spending habits and aiming to live more inexpensively. Forty-two percent of the surveyed pre-retiree cohort agreed with the idea that managing day-to-day expenses has grown more challenging due to rising costs of living, while 27% attributed inflation as the key reason they are saving less for retirement today. Fifty-seven percent of respondents said that inflation “poses the most immediate challenge to their retirement portfolio over the next 12 months,” while 41% said they were avoiding unnecessary expenses like vacations and leisure shopping. Confidence in the U.S. Social Security program has also fallen, the survey found. “Lack of confidence in the viability of Social Security upon retirement (38%) is a significant factor influencing pre-retirees to rethink or redefine their retirement planning strategies,” the results explained. “Over two-fifths (43%) are not counting on Social Security benefits as much as previously expected, and more than a quarter (27%) expect to receive less in benefits than previously anticipated.” The survey was conducted by The Harris Poll on behalf of Nationwide in January 2024.

Opportunities for First Time Home Buyers

By Didier Malagies • 22 Apr, 2024

Depending on where you live there is an opportunity in certain areas that you can get $2,500 towards the closing costs. You also get a lower rate and monthly PMI. Programs open up to you where there is down payment assistance and also the 1% down program available. I am seeing more and more first-time home buyers coming out now and this is information you need to know. Yes, home prices are higher and rates as well. But if you have these programs available and the payment is affordable then the probability of refinancing down the road is in your favor and if inflation continues to go up so will home prices. Maybe it is the right time to buy a home now? Tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

The mortgage rate pendulum swings yet again

By Didier Malagies • 18 Apr, 2024

Expect 2024 to be mildly better than 2023 with mortgage rates falling in the second half of the year, housing experts opined in their forecasts at the end of the year. Cuts to the Federal funds rate (and subsequently to mortgage rates) are imminent, traders enthused after December’s meeting of the Federal Open Market Committee in which committee members predicted three rate cuts in 2024. Some experts forecasted as many as six rate cuts in the year based on this news. Rate cuts are still coming, just not in March , traders and market experts reasoned more recently as the economy continued to run hot. And now on the heels of reports of stronger than expected jobs growth and stickier than anticipated inflation , the market’s shift from optimism to pessimism over rate cuts is complete. Some even expect rate hikes before rate cuts. The pessimism is visible in mortgage rates. Freddie Mac‘s weekly Primary Mortgage Market Survey is climbing back towards 7%. HousingWire’s Mortgage Rate Center , which relies on data from Polly, is already above 7.2%. Rates were as low as 6.91% for Polly and 6.64% for Freddie as recently as February. On Tuesday, they reached 7.50% on Mortgage News Daily, a high for this year. Mortgage rates hold major power in the housing industry; most importantly, high rates exacerbate the current affordability crisis by walloping the buying power of would-be buyers and discouraging some would-be sellers – those with low, fixed-rate mortgages – from listing their homes, a drain on available inventories. All this leaves housing professionals once again fighting for their share of shrinking pies – as we have observed with recently released mortgage data and RealTrends Verified’s brokerage data , as well as deeper dives on the brokerage landscapes in Jacksonville and San Diego . It is unsurprising, then, that real estate stocks have suffered since the FOMC’s March meeting and the recent job and inflation reports. That includes the nation’s top homebuilders (DR Horton and Lennar), mortgage originators (United Wholesale Mortgage and Rocket Mortgage), brokerages (Anywhere and Compass) and residential search portals (Zillow and CoStar, which owns Homes.com). There are other dynamics at play for some of these companies, however. The brokerages are also contending with the rule changes included in a proposed settlement by the National Association of Realtors; some investors also believe those rule changes advantage CoStar at the expense of Zillow . UWM, meanwhile, is contending with a scathing investigative report by a hedge-fund-affiliated news organization whose hedge fund shorted UWM and went long on Rocket; it is also dealing with pending litigation . UWM denies the allegations made in the report. High mortgage rates, fewer mortgage applications and fewer home sales are unfortunately not the only effects housing professionals could see from a more prolonged high-rate environment. There are also spillover effects from other industries, especially office real estate. Regional banks – which traditionally have been major residential mortgage originators – went big on commercial real estate loans as larger banks scaled back in this area in recent years. That increased their exposure to downtown office towers, which have seen an exodus of tenants and a bottoming out of appraised values just as a record $2.2 trillion in commercial real estate debt comes due over the next few years. That ties up capital that could otherwise flow to residential mortgages and in some cases stresses banks like New York Community Bank, parent of Flagstar Bank — the 7th-largest bank originator of residential mortgages, 5th-largest sub-servicer of mortgage loans and the 2nd-largest mortgage warehouse lender in the country. Homebuilders, too, feel the effects of prolonged high rates. Although homebuilder confidence is still up significantly since last fall, new housing starts are slowing . The dim prospects for homebuyers have turned some investors to the nascent build-to-rent sector , essentially a bet that high rates are here to stay for long enough that would-be buyers are now would-be renters.