It was swift: Mortgage rates rise again in the 7% range as it sinks in that the Fed won’t be cutting rates “anytime soon,” mortgage applications plummet to 1995 levels. Even investors get kicked out

The spring sales season was pointless. But what comes next could be worse, that’s the mortgage application and investors tell us.

By wolf richter For wolf street,

7% of mortgages are back. The average interest rate on a 30-year fixed-rate mortgage rose to 6.91%, its highest since November, according to weekly measurements by the Mortgage Bankers Association today.

The daily measure by Mortgage News Daily rose more than 7% just a few days ago last week and earlier this week.

“Inflation is still running very high, and recent economic data is starting to convince investors that the Federal Reserve won’t be cutting rates anytime soon,” the Mortgage Bankers Association told TODAY what has been clear to us for months. .

And so, with mortgage rates like these, the spring sales season — the time of year when sales and prices almost always rise from the gloomy days of winter — has turned into a wonderful misadventure.

Application for mortgage to buy a house According to MBA, after having two lowest-volume-weeks at the end of February this year, for the third week in a row, volumes have declined from already low levels, to the third-lowest since 1995.

Purchase mortgage applications declined compared to the same week:

  • 2022: -31%
  • 2021: -41%
  • 2019: -40%.

What comes next could be muddy. Mortgage applications to buy a home are a forward-looking indicator of where home sales are in a month or two, as measured by closed deals. 7% mortgages at current home prices are indigestible – something has to give, and it’s not the mortgage rate.

And this Backward-looking data on sales volume, such as that by the National Association of Realtors, is already poor.Amid rising supply, falling volumes and rising days on the market, investors pulled out.

investors pulled out of housing was confirmed by the market redfin TODAY: Investor buying plunged up to 49% year-on-year in the first quarter across metros tracked by Redfin.

“Widespread economic uncertainty and recession fears are also prompting investors to pump the brakes. Some investors may shift their money to other asset classes that provide better returns, such as stocks and bonds,” Redfin said. .

Biggest year-on-year decline in investor buying:

  • Nassau County, NY: -67.9%
  • Atlanta, GA: -66%
  • Charlotte, NC: -66%
  • Phoenix, AZ: -64.2%
  • Nashville, TN: -60.4%
  • Las Vegas, NV: -60.2%
  • Jacksonville, FL: -56.6%
  • Philadelphia, PA: -56.5%
  • Tampa, FL: -54.8%
  • Orlando, FL: -54.7%

“Borrowing costs climbed even higher in May, meaning investors could further withdraw from the housing market in the second quarter. Investor home purchases typically rose on a quarter-over-quarter basis in the spring,” Redfin said. , but we may see them flat or decline when the second quarter numbers come in.

so there goes, High mortgage rates had given rise to the theory that investors, who would not need a mortgage because they could finance at the institutional level, would simply swoop in and pick up the pieces left by potential buyers who were left out of the market. But this is not happening. Investors do not like to overpay for properties.

With 7% mortgages now nearing the end of the spring sales season, and investors pulling out en masse, summer home sales could be disappointing.

Applying to refinance existing mortgage fell in 2022 as mortgage rates rose, and has since faltered to its lowest amount since January 2000. The mortgage industry was one of the first to announce massive layoffs in late 2021 and into 2022. Refinancing mortgages was a big part of the revenue for mortgage lenders and brokers, and it disappeared.

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