NAR News Oct -2023

NAR NEWS TODAY 

Home buyers can’t seem to catch a break, faced with a real estate market plagued by low inventories, high home prices and high mortgage rates. This week buyers received another blow as mortgage rates continued to surge—averaging 7.49%—and further pressing on their home-shopping budgets.

“Several factors, including shifts in inflation, the job market and uncertainty around the Federal Reserve’s next move, are contributing to the highest mortgage rates in a generation,” says Sam Khater, Freddie Mac’s chief economist. “Unsurprisingly, this is pulling back home buyer demand.”

Indeed, mortgage demand for home purchases and refinancings last week dropped to the lowest level since 1996 as mortgage rates continued to climb, the Mortgage Bankers Association reported this week. Applications for home purchases slowed to the lowest level of activity in nearly 20 years “as the rapid rise in rates pushed an increasing number of potential home buyers out of the market,” says Joel Kan, MBA’s deputy chief economist.

Home buyers frantic to find relief from the higher borrowing costs are reaching for adjustable-rate mortgages, which tend to have lower introductory rates before resetting after five or 10 years or so. ARMS comprised 8% of the purchase applications last week, up from 6.7% a month earlier when interest rates were lower, MBA reports.

Mortgage Denials Are Growing

Meanwhile, more aspiring home buyers also are having a difficult time getting approved for a mortgage. Lenders last year denied loan applications due to “insufficient income”—more often than at any other point on record, according to the records dating back to 2018, a report from the Consumer Financial Protection Bureau shows. About 9% of home purchase applications among all borrowers were denied in 2022. Insufficient income represented more than 50% of the denials among Asian Americans, 45% for Black and Hispanic applicants, and 40% for white applicants.

Higher home prices and higher mortgage rates are to blame for the higher rates of income-based mortgage denials, Tedd Rossman, a Bankrate senior industry analyst, recently told CNBC. Higher rates mean larger monthly mortgage payments and “that could put you in the category of having insufficient income,” Rossman says.