Buyers strike? Mortgage applications fall deep into the 2019 lineup as home seekers to live off ‘Raging Mania’

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Investors can still breathe hard.

By Wolf Richter for WOLF STREET.

Regardless of investor demand, demand from buyers needing a regular mortgage to buy a home continues to decline and, during the week ended May 28, is down 4.0% from the week before, at the lowest level since May 2020 (when mortgage demands came out of the collapse of the previous weeks), according to the Mortgage Bankers Association today.

This put mortgage applications to buy a home roughly in the middle of the 2019 range, having settled the entire pandemic boom (the sharp drop and rebound in February was a result of snowmageddon ; data via Investing.com):

More houses to buy? Wait … available-for-sale inventories of existing homes, while still low, have been rising for months and hit their highest level since November in April, and supply hit its highest level since October, according to the National Association of Realtors two weeks ago.

The NAR also confirmed the drop in sales volume: Existing home sales have been down for months and in April hit their lowest level since July 2020, after wiping out most of the pandemic peak.

This is because mortgage rates edged up from their all-time lows at the end of last year, but remain close to their all-time lows, with the average interest rate on fixed-rate mortgages 30 years with compliant balances and a down payment of 20% to 3.17%. , according to the MBA this morning:

Mortgage applications to refinance existing mortgages also weathered the pandemic peak and fell below last year’s level.

But those refi requests remain more than twice as high as at the start of 2019, when the average 30-year fixed-rate mortgage carried a now unthinkably high interest rate of 4.2%, despite having exceeded 5% even more unthinkable at the end. 2018.

What would the housing market look like with 5% mortgage rates and sky-high prices today? It was a rhetorical question. At the time, among the effects it had, it significantly calmed refi activity:

There are now a number of ‘hurdles’, as the MBA calls it, to home sales, the main hurdle being sky-high prices and, by extension, affordable supply that has fallen outside the affordability bracket of. many potential buyers.

Then there is the possibility that the explosion in volume over the past 12 months, a form of panic buying, is now showing signs of exhaustion, as many people who really wanted to buy have bought, and enough potential buyers looking for a home to live in – rather than investors – took a deep breath and stepped back from the “raging mania” and mad auction wars.

Investors would still be present in large numbers and even worry Fed officials. But enough regular homebuyers can stay away from the raging fad about where it started showing up in the numbers.

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