Coffee really does taste better on Fridays. But if you’re in the housing market right now it’s probably hard to swallow every day of the week. Mortgage applications have cratered, and business is cooling after a historic boom.
I’m Phil Rosen, and today we’re breaking down the housing market.
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1. Mortgage demand is at its lowest point in 22 years. Over the last week, mortgage applications fell 7%, and they’re down 21% since last June.
A traditional 30-year fixed mortgage saw average interest rates rise to 5.4% last week, compared to rates in the low 3% range around this time last year.
The cost to buy a home has risen dramatically in 2022, which has resulted in a drop-off in demand.
Or, more simply: there’s been “a meltdown.”
Pantheon’s chief economist Ian Shepherdson said the sharp drop in applications is likely to continue, given that interest rates are set to rise further. This could be a silver lining for buyers who’ve been locked out of the market by the dual headwinds of stubbornly high prices and higher mortgage rates.
“The chance of a short period of clear declines in prices is increasing, primarily because new home inventory has shot higher,” Shepherdson said.
And weakness in housing begets weakness in lumber. Prices for the key building commodity dropped another 4% Wednesday to hit their lowest level in nine months. Builders have pulled back on new housing starts as they see inventories across the country rising.
Prices have slipped in nine of the last 11 weeks, and the strength in mortgage rates has moved inversely with weakness in lumber.
Lumber prices are down 50% this year, and have plunged 67% from their record-high reached last May of around $1,700 per thousand board feet.
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