As record-low mortgage rates remain steady, mortgage demand is higher than it was a year ago. However, there may be signs that first time homebuyers are struggling.
Mortgage applications for home purchases decreased 2% last week from the week before, but are still 21% higher annually. New construction demand remains strong while the number of existing homes for sale is still low.
Refinancing remains flat this week, but is 121% higher than a year ago due to record low mortgage rates right now.
The average interest rate for a 30 year fixed mortgage is 3.2% with points, origination fees of .37% (an increase from .35%) and 20% down.
Interest rates for an FHA backed 30 year mortgage jumped to 3.27%, which led to a decrease in home purchase and refinance applications.
Many first time homebuyers prefer FHA backed loans as the downpayment requirements are lower, so a decrease in demand could indicate that first time homebuyers are struggling.
“A pullback on FHA purchase demand could be a red flag in the housing recovery. These buyers made up a strong 35% of closed sales in June, according to the National Association of Realtors, but that was before the pandemic took another turn for the worse. Higher interest rates, as well as rising home prices, may be weighing on this cohort.”