Habitat February 2024 Housing Market Overview

Demand for new mortgages has begun to dip slightly as interest rates once again rose above 7%, thanks to a better economic outlook. Refinancing on mortgages, meanwhile, ticked up somewhat, although this is due in part to how low the rate of refinancing applications had become. Meanwhile, the commercial real estate market continues to face serious troubles, with many current owners being forced to sell property well below their original purchase price to avoid defaulting on their loans.

Interest Rates Increase, Thanks to Strong Economic Data

The interest rate for a 30-year fixed rate mortgage with conforming loan balances briefly rose to 7.04% in early February, thanks to strong economic data indicating likely improvement over the next few months. This was due to a significant extent to an increase in yields from 10-year Treasury bonds, which are often used to judge the state of the overall economy. While this might be overall good news, that is little comfort for buyers, who were just beginning to enjoy the benefits of falling interest rates.

Mortgage Demand Flattens Out

Mortgage demand began to decline, thanks to interest rates once again crossing the 7% line. Demand for new mortgages fell by about 1% in early February, effectively flattening out, which is still about 19% lower than it was at the same time last year. Although rates are expected to start declining once more, this abrupt increase in interest rates has hindered what appeared to be the beginnings of a recovery for the housing market.

Refinancing on the Rise

Refinancing for mortgages did go up significantly, increasing by 12% in the first week of February and going up by 1% compared to the same time the previous year. However, this is due in part to refinancing falling so much that even a slight increase in refinancing rates was significant. It is likely this will remain the case until interest rates fall enough to once again make the prospect of refinancing appealing to more current homeowners.

Commercial Real Estate Faces Significant Issues

The commercial real estate market, meanwhile, is facing significant problems thanks to an overabundance of properties on the market that few people seem to want to buy. This has forced some current property owners to accept far lower prices for their properties than they originally paid for them, or else face default on loans with substantial negative equity. It is likely that the impact of these issues will continue to depress the commercial real estate market for months or years to come, given the extent of problems plaguing current commercial property owners.