Lack Of Home Listings Is Taking A Toll On Mortgage Demand

• Mortgage rates fell last week, but demand for home loans didn’t move higher as a result. Other aspects of today’s housing market are outweighing the benefit of lower mortgage rates right now, namely a lack of supply.
• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.40% from 6.45% for loans with a 20% down payment. It had been over 7% just a month ago.
• Mortgage applications to purchase a home, however, dropped 4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was 35% lower than the same week one year ago.
• New listings were down 20% year over year in March, according to Realtor.com, and total inventory was about half of what it was in March 2019, pre-Covid pandemic.
• Demand for Federal Housing Administration and Department of Veterans Affairs loans, which are favoured by lower-income borrowers due to low down payment requirements, declined more than those for conventional loans. While there is strong demand from first-time homebuyers, with millennials hitting their peak buying age, affordability is still a challenge right now.
• Applications to refinance a home loan also dropped, down 5% for the week and 59% lower than the same week a year ago. Given that rates are 150 basis points higher than they were at the same time last year, there are very few borrowers who can now benefit from refinancing.

(Source: CNBC)