Mortgage costs sizzle, volume declines as summer begins

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Mortgages continue to be less affordable for consumers and less profitable for originators, the Mortgage Bankers Association said in a series of reports in recent days.

It’s been another bad week for mortgage trends, starting with a Census Bureau report on Tuesday that found new single-family homes sold at a seasonally-adjusted annual rate of 591,000 in April, down 16.6 % compared to March’s revised estimate of 709,000. And March was 10.5% lower than February.

Curt Long, chief economist and vice president of research at NAFCU, said while the total number of homes for sale rose 8.3% in April to 444,000, only 38,000 of those homes are complete. .

“Supply chain and labor shortages are delaying home completions and continue to limit the supply of new completed homes relative to demand,” he said. “Median prices continue to rise, reflecting a still undersupplied market despite falling demand.”

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Long said he expects new home sales to be volatile in the near term as the market finds its footing. He said sales were not expected to fall too much “given the strength of household finances and the fact that there is still unmet demand in the market”.

“Rising rates and high prices are dampening a market that had significant momentum just a few months ago,” Long said.

On Thursday, the MBA reported that homebuyer affordability declined in April, with the national median payment requested by applicants rising 8.8% to $1,889 from $1,736 in March.

Edward Seiler, the MBA’s assistant vice president for housing economics, attributed the higher payment burden to rapidly growing house prices, low inventory and an 80 basis point increase in mortgage rates. The typical borrower’s principal and interest payment was up $153 from March and $569 from a year ago.

“Despite strong job and wage growth, housing affordability has deteriorated since the start of the year,” Seiler said. “Mortgage payments are a larger share of homebuyer income, and skyrocketing inflation is making it harder for some potential buyers to save up for a down payment or find the extra money they need to afford a payment. higher monthly payment.”

Edward Seiler Edward Seiler

The MBA’s May 16 forecast called for mortgage rates to stay above 5% for most of 2022, but Seiler said potential buyers should start to see a moderation from the two-point price appreciation. figures reported for more than a year in most of the country.

On Wednesday, the MBA reported that mortgage applications for the week ending May 20 fell by a seasonally adjusted 1.2% from the previous week, which followed a weekly drop of 11% for the week ending. May 13.

The seasonally adjusted shopping index rose 0.2% for the week ending May 20, after falling 12% the previous week.

Joel Kan, assistant vice president of economic and industry forecasts at the MBA, said the 30-year fixed rate fell for the second week in a row to 5.46%, but was still well above the low rates of the two last years. Refinancing activity is a third of what it was in January.

“Rising mortgage rates are also impacting buy market conditions as the buy index remained near lows last seen in the spring of 2020 when a significant portion of activity was suspended. due to the onset of the pandemic,” Kan said.

Joel Can Joel Can

“Currently, higher rates, low inventory and high prices are keeping potential buyers out of the market,” he said.

The National Association of Realtors reported on May 19 that sales of existing homes fell in April for the third consecutive month under the weight of rising prices and rising mortgage rates.

On Tuesday, the MBA reported that mortgage originators reported making less money in the first quarter. Independent mortgage banks and bank mortgage subsidiaries reported net gains of $223 on each mortgage they issued in the first quarter, down from $1,099 in the fourth quarter.

Marina Walsh, vice president of industry analysis at the MBA, said average pre-tax net production income was just 0.05% – the lowest since the fourth quarter of 2018 and well in below the quarterly average of 55 basis points dating back to 2008.

“It was a challenging mortgage market environment in the first quarter of 2022, with rising mortgage rates and low housing inventory driving down production volume,” Walsh said.

Marina Walch Marina Walch

“While lower production revenues contributed to low profit margins, the main driver was cost, with total loan production expenses hitting a new record high of $10,637 per loan – up more than $1,000 per loan from Q4 2021 and over $2,500 per loan from a year ago,” Walsh said.

Credit unions issued $83.8 billion in home loans in the first quarter, just 0.2% more than in the first quarter of 2021. Other loans rose 11.1% to $109 billion. dollars, Callahan & Associates reported May 18.

The MBA’s May 16 forecast calls for lenders to generate $1.69 trillion in purchases this year, up 2.9% from 2021. Purchases are expected to rise 3.1% to 1.75 trillion dollars in 2023.

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