Credit story to: Mortgage rates via Mortgage News Daily
A Little Bit Demanding
Mortgage demand got a boost as interest rates fell.
Mortgage applications to purchase a home increased 5% for the week. Applications are still 19% lower than the same week one year ago.
Rates: Mortgage rates fell last week for the fourth time in five weeks. It’s a welcomed sign for potential homebuyers looking to get into the market.
“Rates have declined more than 50 basis points over the past six weeks, which has helped to spur a small increase in purchase applications,” said Mortgage News Daily.
This “drop” in interest rates is likely a blip, not an indicator of long term rates. There are some opinions coming from the RE industry that it may take as long as 10 years to get thing back to ‘normal’, depending on how normal is defined.
The other thing to consider is that the RE industry is in for a major change. The NAR lost a major lawsuit and if it can afford to appeal the multi-billion dollar loss remains to be seen. Regardless, it looks as though commission structures are about to change dramatically, especially buyers’ agents, who will likely no longer be paid from seller proceeds, meaning buyers will have to negotiate the commission with their agent. It’s going to be a bumpy ride…
Some of my Realtor colleagues, who work only for buyers, are questioning where this ruling will take the RE industry. What may happen is the elimination of the buyer’s agent all together, forcing buyer to negotiate directly with the seller’s agent. Overall I think you statement that it’s going to be a bumpy ride is spot on.
There’s more than interest rates from the financial sectors that affects new home construction. What comes next does not apply to every region in the US.
During the Covid years, the prime interest rates were at all time lows. Many builders invested sold corporate bonds to private investors at higher rates that one could find in T-Bills. A few years later T-Bill interest rates are up and builders are sitting on low interest corporate bonds, and are now able to compete against the banks. This is a contributing factor for the decline in bank mortgage interest rates, as the Banks are now competing against the builders as the builders are now offering mortgages interest rates below what banks can.
Another factor to the housing shortage in some locations is the shortage of qualified trades workers. This labor shortage is holding the pace of construction at a slower than needed pace.
