On The Mortgage Front
Freddie Mac (OTCMKTS:FMCC) reported the 30-year fixed-rate mortgage averaged 6.15% as of Jan. 19, down from last week when it averaged 6.33%; a year ago at this time, it averaged 3.56%. The 15-year fixed-rate mortgage averaged 5.28%, down from last week when it averaged 5.52%; a year ago at this time, it averaged 2.79%.
“As inflation continues to moderate, mortgage rates declined again this week,” said Sam Khater, Freddie Mac’s chief economist. “Rates are at their lowest level since September of last year, boosting both homebuyer demand and homebuilder sentiment. Declining rates are providing a much-needed boost to the housing market, but the supply of homes remains a persistent concern.”
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While rates were down, mortgage applications were up. The Mortgage Bankers Association Market Composite Index for the week ending Jan. 13 increased by 27.9% on a seasonally adjusted basis from one week earlier; on an unadjusted basis, the index increased 32%. The seasonally adjusted Purchase Index increased 25% and the unadjusted index took a 32% upswing. The Refinance Index increased 34% from the previous week.
“Mortgage application activity rebounded strongly in the first full week of January, with both refinance and purchase activity increasing by double-digit percentages compared to last week, which included the New Year’s holiday observance,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Despite these gains, refinance activity remains more than 80% below last year’s pace and purchase volume remains 35% below year-ago levels."
Fratantoni noted that mortgage rates were “at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall. As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”
On The Homeownership Front
Homeowners ages 62 and older saw their housing wealth grow by 1.95% or $226 billion in the third quarter of 2022, reaching a record $11.81 trillion, according to the latest quarterly release of the National Reverse Mortgage Lenders Association (NRMLA)/RiskSpan Reverse Mortgage Market Index report.
This index rose in the third quarter to 413.22, an all-time high since the index was first published in 2000. The increase in older homeowners' wealth was mainly driven by an estimated 1.95% or $268 billion increase in home values, offset by a 1.93% or $42 billion increase in senior-held mortgage debt.
“Multiple studies published over the past couple of years highlight the challenges faced by women to save for retirement because of competing priorities, such as caring for children or an aging parent or relative,” said NRMLA President Steve Irwin. “Nevertheless, they own a substantial asset, their home. Therefore, when meeting with a financial planner, or other trusted advisor, it's very important to consider home equity as a strategic asset that can be used to help enhance retirement security.”
On The Rental Housing Front
The newly published 2023 Rental Affordability Report from ATTOM found the average three-bedroom rent is more affordable than owning a comparably sized median-priced home in 210 of the 222 U.S. counties analyzed for the report, or 95% of the national market.
While renting and owning a three-bedroom home can consume more than one-third of average wages in most major housing markets, ATTOM determined that average rents still require a significantly smaller portion of wages than major home-ownership expenses on three-bedroom properties. This comes even though rents have risen faster than home prices over the past year in roughly half the nation.
“What a difference a year makes,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “Last year our study concluded that it was more affordable to own than to rent in 60% of the markets analyzed.
But with mortgage rates doubling, monthly payments for new homeowners rose by 45% to 50% compared to a year ago, even though home price appreciation has slowed down dramatically. This has made renter more affordable in the majority of markets, despite rental rates continuing to rise over the past year.”
