Residential Mortgage Market Remains ... Depressing, Painful, Bleak?

The past week brought a slew of reports on the state of housing and financing that might be called lousy, depressing, dismal or select a variety of more profane words.

The National Association of Realtors reported Thursday that existing homes sold at a seasonally adjusted annual rate of 3.96 million in September, 15.4% lower than a year earlier and 2.0% lower than August.

The Mortgage Bankers Association released a new forecast Oct. 15 that lowered its expectations for originations through the end of next year. On Wednesday the MBA reported a new low for mortgage applications of all types, and on Thursday said applications for new homes — one of the year’s bright spots — fell from August to September.

The reasons for the dismal results should sound familiar to anyone who cares about residential mortgages, which might include credit unions, where they still account for close to half of their loans.

NAR Chief Economist Lawrence Yun said limited inventory and low housing affordability continue to hamper home sales — as they have all year.

“The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains,” Yun said.

More than half of existing homes sold for at least $394,300 in September, an increase of 2.8% from September 2022’s median price of $383,500. All four U.S. regions posted price increases.

“For the third straight month, home prices are up from a year ago, confirming the pressing need for more housing supply,” Yun said.

Joel Kan, deputy chief economist for the Mortgage Bankers Association, said mortgage applications for new homes in September rose 14.9% from a year earlier but fell 12% from August, which is reported without seasonal adjustments.

“New home purchase activity weakened in September, as the recent spike in mortgage rates pushed more homebuyers out of the market,” Kan said.

“Demand for newly constructed homes remains relatively strong due to the persistent shortage of resale inventory, but increasing mortgage rates are impacting would-be buyers,” Kan said.

The FHA share of applications reached 25% in September, the highest share in the survey dating back to 2013. “This is an indication that demand from first-time homebuyers is still somewhat strong,” Kan said.

In a separate, seasonally adjusted measure, the MBA estimated new homes sold in September at an annual rate of 634,000 homes anniversary of the Freedman’s Bank the weakest sales pace since October 2022 and down 9.7% from August.

Applications for all residential mortgages in the week ending Oct. 13 were 6.9% lower than the previous week after seasonal adjustments.

“Applications decreased to their lowest level since 1995, as the 30-year fixed mortgage rate increased for the sixth consecutive week to 7.70 percent — the highest level since November 2000,” Kan said.

The rates are high compared with a few years ago, but if you’re lucky enough to remember back more than half a century, things aren’t so bad.

Freddie Mac began collecting mortgage rate data in April 1971, when button-fly flares with red-white-and-blue stripes and two-toned platform shoes were the rage. In the 2,743 weeks since then, the 30-year-fixed rate has been at or over 7.44% half the time.

Rates were at or above 10% from November 1978 to March 1986, and peaked at 18.44% Oct. 30, 1981, the year the first millennials were born and President Ronald Reagan took office.

Buyers who are 35 years old might not have begun paying attention to mortgage rates until, say, 2013. Since then the median rate has been 3.94%. From 1971 until before the pandemic began in March 2020, rates had never been below 3.3%, but they were at or below 3% from July 2020 to December 2021.

Now they’re not.

The MBA’s Oct. 15 forecast expects mortgage rates will fall to 5.5% in December 2024.