Mortgage News February 15, 2023
The technology-powered real estate brokerage Redfin (redfin.com) reported that homebuyers on a $2,500 monthly budget can now afford a $400,000 home again after mortgage rates dropped below 6%.
On February 2, Mortgage News Daily reported that the average daily mortgage rate was 5.99%, the first time it has been below 6% since mid-September. Another way to look at the change in affordability is to say that a buyer with a $2,500 monthly budget will be able to spend about $35,000 more on a home than they could in November when rates peaked at over 7%.
There is still about $95,000 less spending power for a buyer in that budget than they had a year ago, when rates were around 3.5%. However, the rates have declined over a full percentage point from their apex, which is good news for buyers.
The market is seeing some of those buyers return. A year-over-year decline of 23% in pending home sales during the four weeks ended January 29 was the smallest since September and a significant improvement compared to November’s 33% decline. The Homebuyer Demand Index for Redfin-an indicator of how many people are requesting tours and other services from Redfin agents-has increased 19% from the October low. There is also a feeling of increased activity in the marketplace, with 37% of newly listed houses receiving an offer within two weeks of going on the market, the highest level since July.
In addition to home buyers, sellers are becoming more active. The number of new homes for sale dropped 17% year over year in February. It is the smallest drop in over four months, and it is an improvement from the December trough when the number of new listings dropped 24%.
Despite rising 15% from their early-November low, mortgage-purchase applications declined 10% from the week before, which may reflect the intermittent nature of the recovery. Due to the recent volatility of the mortgage purchase application index, it’s hard to draw strong conclusions from this week’s decline.
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