Fri, 10/16/2020 – 11:20
We haven’t written about the real estate market in a couple of months, but the story remains the same. Mortgage rates continue to hit record lows while a diminishing housing supply continues to drive home prices higher.
Last week saw the average contract interest rate for a 30-year fixed-rate mortgage drop marginally to 3% from 3.01% the previous week. Total mortgage application volume fell by 0.7% for the week as refinance activity fell slightly by 0.3% and applications to purchase a home fell by 2%, according to the Mortgage Bankers Association’s seasonally adjusted index.
Despite refinancing activity still standing 50% higher than the same period last year, the annual increase was as high as 100% earlier this year. Although the previous week did see the highest refinance volume since mid-August when it rose by 8%.
“There are signs that demand is waning at the entry-level portion of the market because of supply and affordability hurdles, as well as the adverse economic impact the pandemic is having on hourly workers and low- and moderate-income households,” MBA economist Joel Kan said. “As a result, the lower price tiers are seeing slower growth, which is contributing to the rising trend in average loan balances.”
Home prices continue to rise at a pace that puts home ownership far out of reach for many Americans. According to Redfin, the median home sold for a record high $319,769 in the four weeks ending September 27. The 14% year-over-year increase marked the largest jump since 2013.
Redfin found that the average home sold for 99.4% of its asking price, which is the highest the company has ever recorded. About half of the homes that went into contract during the same period had an offer accepted within the first two weeks of being on the market. Redfin says the number of active listings on the market dropped to an all-time low in September as there are now 28% fewer homes for sale than during the same period last year.
“The question on everyone’s mind is ‘how fast can prices keep rising?,'” Redfin chief economist Daryl Fairweather said. “This is likely to be as good as it gets for home sellers, who definitely have had it very good for a very long time.”
With the housing market on an absolute tear, the million dollar question remains whether it’s a good time to rush and buy a house or hold off and hope prices will come down to earth.
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Author: Tyler Durden