The demand for mortgages is on the rise, primarily driven by the sales of newly constructed homes. Despite a slight increase in mortgage rates, buyers continue to seek out opportunities in the housing market.
According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume climbed 3% compared to the previous week. Adjustments were made to account for the Juneteenth holiday. Applications for purchasing a home also experienced a 3% increase for the week, reaching the highest level since early May. However, they remained 21% lower compared to the same period last year.
In May, sales of newly built homes recorded a substantial boost, surging 12% compared to April and registering a 20% increase from May 2022, as reported by the U.S. Census. Builders are effectively stimulating demand by offering incentives, such as mortgage rate reductions.
The spread between jumbo and conforming rates widened to 16 basis points, marking the third consecutive week in which the jumbo rate surpassed the conforming rate.
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The widening spread and the rise in the jumbo rate can be attributed to recent regional bank failures. The tightening of bank credit, particularly at community banks, has led to increased rates.
While applications to refinance a home loan saw a 3% increase for the week, they were 32% lower compared to the same period last year. The majority of borrowers presently hold mortgages with interest rates below 4%.
In summary, the housing market continues to exhibit resilience, with mortgage demand remaining robust despite rising rates. The allure of newly constructed homes, coupled with various incentives offered by builders, has sustained the interest of buyers.
As the market evolves, mortgage lenders and borrowers navigate the changing dynamics, seeking opportunities amidst the prevailing economic landscape.
