The Truth Behind Declining Mortgage Applications
The real estate market has truly been historic. Many anticipated the housing market to collapse because of the pandemic as states shut down and many became unemployed. In spite of this, the opposite happened. The government stepped in to stop foreclosures and used the power of the Federal Reserve to drop mortgage rates. This caused a surging real estate market. Some are still worried that today’s housing market is too good to be true. For them, the latest data about the number of mortgage applications might be a good sign that the real estate market is in trouble. However, the latest data about mortgage applications does not give you the full picture of the housing market. The team at Peoples Choice Mortgage is here to tell you the truth about recent data that suggest home sales are declining. The reality for homebuyers and homeowners is much better than you would think.
New Data Indicates Mortgage Applications are Declining
Existing mortgage applications volume is currently at a three-month low. The latest round of data says that this trend started in August. The Refinance Index decreased by 3% and the Purchase Index decreased by 0.2%. This is the lowest it has been in a while, following a summer of surging mortgage applications. These drops in signed contracts and home loan applications are from the most recent reports.
The Mortgage Bankers Association said its measure of mortgage application volume dropped 6.9%. We are currently in what was thought to be a historically busy fall housing market, but the data says otherwise. While this data is true, it does not give you a full picture of the state of the housing market.
Why Did Existing Mortgage Applications Drop?
Existing mortgage applications have declined because of increasing rates. The existing home supply on an annual basis has gone down by 28%. Although supply is down, many people still want to buy a home and demand is through the roof. Demand to buy a home is high because mortgage rates are near historic lows. Since there is still a high demand, the real estate market is thriving with potential room to grow.
The combination of high demand and a small supply is driving up the price of homes. This creates incredible opportunities for homeowners. Homeowners can consider selling their homes and taking advantage of a seller’s market. They can also sit back and watch as the value of their homes increase, which would in turn increase their equity. Americans have already gained a lot of home equity over the past year because of how the market was. This should encourage homeowners and potential buyers to make moves in today’s real estate climate.
Mortgage Applications Are Part of the Picture
Even though existing mortgage applications are declining, new home sales are increasing. This data is extremely good news for people interested in buying a home. It marks a 13 year high in supply. Sales are increasing and projected only to rise in the upcoming months. The distinction between declining mortgage applications and new home sales is important because it shows that the future is bright. People still want to buy homes. New home sales are an indicator that despite mortgage applications declining, there are still opportunities for homeowners. This is further proof that there is still a lot of demand in the market to buy a new home. Again, this is great news for existing homeowners and potential home sellers.
The Reality of Declining Mortgage Applications
All of the data shows us that there is no reason to fear for the future of the housing market. Initially, the data can appear scary. The data makes you wonder why home sales are declining. However, when you peel back the data, we see that home sales are declining because of a lack of supply. This is important because as shown above, the demand for buying homes is still there. This is proven even further when we look at the rise in new home sales, as opposed to existing declining sales.
This is also great news for home buyers. It means that the real estate market is nowhere near its peak. There is still a lot of potential room for growth. Buying a home now means that you can still benefit from high demand and rising home values.
Final Thoughts
Today’s data about mortgage applications demonstrates that the real estate market is thriving. Homebuyers and homeowners should feel great about the future. One thing that the data indicates is that homebuyers are under a lot of competition from other homebuyers. This means you need every advantage possible in order to buy the home of your dreams. Working with an experienced realtor who understands your market inside and out can be the difference between buying your dream home and not. If you are interested in buying a home, contact us! The team at Peoples Choice Mortgage is here to make your dream of buying a home or selling your home a reality.
