Mortgage demand drops to lowest level since 1966 ahead of 8% rates

Jeremy Engle
·2 min read
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Political uproar in the Halls of Congress brought further turbulence to the already stormy mortgage marketplace last week as demand for purchase money contracts dropped to the lowest level since 1966. All this while interest rates headed upward toward 8%, the rate for a 30-year fixed-rate mortgage increased to 7.53% from 7.41%.

There was a distinct jump following the furor surrounding the narrowly avoided government shutdown along with some positive data from the manufacturing sector. And Tuesday brought additional strong economic news in the realm of jobs and labor turnover.

Job openings in decline since March, saw a 7.2% increase in August, rising to 9.61 million. This is not the new the Federal Reserve Board is looking for as an indication of progress on inflation. The Fed will be looking for that number to be under million.

Just across the street south of the proposed subdivision sits a recent Woodside Homes development.
Just across the street south of the proposed subdivision sits a recent Woodside Homes development.

Despite continuing positive economic news, movement settled out Wednesday and Thursday, even falling slightly heading into the most anticipated news of the week on Friday a week ago, the U.S. employment and non-farm payroll reports. To everyone’s surprise the U.S. added a staggering 336,000 new jobs in September, blowing away both last month’s total of 187,000 and this month’s projection of 170,000.

Fannie Mae announced this week that starting in mid-October, it will allow a 5% minimum down payment on owner-occupied conventional loans for 2-4 unit multifamily properties. Meanwhile, in the largest single-week drop since April, mortgage applications 6%.

Applications to refinance a home loan dropped 7% for the week and were 11% lower than the same week one year ago. Refinances now make up less than one-third of all mortgage applications, just two years ago, when rates were setting multiple low record levels, refinance demand made up roughly three-quarter’s of all mortgage applications.

“The purchase market slowed to the lowest level of activity since 1966, as the rapid rise in rates pushed an increasing number of potential homebuyers out of the marketplace,” Joel Kan, senior economist for the Mortgage Bankers Association.

A separate, daily survey on mortgage rates from Mortgage News Daily showed the average rate on the 30-year fixed-rate rising even higher this week, hitting 7.72%.

As always, we urge you to contact a local mortgage lender in your marketplace to get a personal interview. You can learn exactly what is best for you and your family, get prequalified and be ready to start looking for your next home in the Valley or Coast.

Jeremy Engle is the Owner/Senior Loan Officer at Vero Mortgage, a division of Country Club Mortgage with offices in Visalia, Dinuba, Hanford, Fresno, San Luis Obispo and now available in the Eastern Sierra Nevada town of Mammoth Lakes. Jeremy can be reached at Jeremy@jeremyengle.com or 559-734-5000 in the Valley, 805-544-2775 at the Coast or 760-914-4413 in Mammoth Lakes.

This article originally appeared on Visalia Times-Delta: Mortgage demand drops to lowest level since 1966 ahead of 8% rates