The number of people seeking new mortgages fell 14% in the first week of October, indicating the lowest number of mortgage applications since 1997. This extraordinary drop in the number of applications for new mortgages is spurred by a number of factors, including pressure from rising interest rates, as well as difficulties emerging from Hurricane Ian. While the market is expected to pick up somewhat as hurricane recovery goes forward, the market overall seems like it will continue to cool.
What the Statistics Say
According to data from the Mortgage Bankers Association, the number of mortgage applications in the first week of October fell by 14.2%, compared to the previous week. This comes at the same time that mortgage interest rates continue to rise, going from 6.52% to 6.75% for 30-year fixed rate mortgages. In addition, the number of people seeking to refinance their homes fell 18%, which constituted an 86% drop compared to the same time last year.
What The Statistics Mean
In short, this means that applications for mortgages are falling at the same time that it is becoming more expensive to take out a mortgage. Rising interest rates mean that people will pay more for their monthly mortgage payments, making them less appealing to prospective homeowners. People are also far less likely to refinance their mortgages while interest rates are rising, which has spurred the drop in refinancing applications.
Additional Pressure From Hurricane Ian
In addition to overall market factore, Hurricane Ian has significantly impacted the real estate market, especially in areas that were directly impacted by the storm. People who may have been seeking homes in the area may find those homes have been damaged or destroyed by the storm, while people in affected areas may need to put their own purchases on hold due to storm-related expenses. Fortunately, the effects of the storm are likely to diminish as people begin to rebuild and recover from the hurricane.
What This Means For the Market
On the whole, the current market is looking less favorable for buyers than it has previously. While prices for new homes have been dropping, that has been mitigated by rising mortgage rates and low inventory, keeping the number of new mortgage applications low. In the meantime, sellers are also struggling to sell their property at the rates they are accustomed to, as high interest rates make previously high prices too expensive for most buyers.
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