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Despite recent upticks in mortgage rates, home sales and mortgage applications are on the rise. Economists say this may be indicate that more prospective home buyers are done holding out for significant dips in borrowing costs and are ready to move forward with their purchase.
Applications for a mortgage to purchase a home increased 2% for the week, with a notable uptick in FHA loan applications, which tend to be popular with first-time home buyers and low- to moderate-income purchasers.
“For Sale inventory has loosened in some markets, and some potential buyers have been able to take advantage of increasing supply and lower FHA rates, which were down slightly in comparison to the conforming 30-year fixed rate,” says Joel Kan, an economist with the Mortgage Bankers Association.
The National Association of REALTORS® also reported Thursday that existing-home sales posted the first yearly gain in more than three years and rose 3.4% month over month in October.
The 30-year fixed-rate mortgage averaged 6.84% this week, according to Freddie Mac. Mortgage rates have fluctuated from the lower to higher ends of the 6% range over the last several months. Rates are much lower than a year ago, when they were marching upwards to 8%.
“The new normal with mortgage rates will be around 6%,” Lawrence Yun, chief economist for the National Association of REALTORS®, said in a conference call Thursday about the latest uptick in home sales. “Consumers are getting used to the higher rates and may be starting to accept 6% or 7% rates as the new normal. More housing inventory and job gains will be drivers that will boost home sales.”
Yun also said the “lock-in” effect of homeowners being unwilling to give up their 2% or 3% mortgage rate from a few years ago will likely lessen. Job changes, marriages, family planning, aging and other life milestones will drive more decisions to sell regardless of mortgage rates.
Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 21:
- 30-year fixed-rate mortgages: averaged 6.84%, rising from last week’s 6.78% average. A year ago, 30-year rates averaged 7.29%.
- 15-year fixed-rate mortgages: averaged 6.02%, up from last week’s 5.99% average. Last year at this time. 15-year rates averaged 6.67%.
