What happened to demand for mortgages after latest Fed rate hike?

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Mortgage demand surges after Fed appears to pause rate hikes

After last week’s Fed rate hike, homebuyers appeared to come back into the market after spending some of the Spring on the sidelines.

According to Joel Kan, the Mortgage Brokers Association deputy chief economist, “Mortgage applications responded positively to a drop in rates last week, as the Fed signaled a potential pause at the current level for the federal funds rate in anticipation of inflation slowing and tightening financial conditions that will slow economic and job growth.”

Applications for a mortgage to purchase a home were up 5% week-over-week. Home loan refinance applications were up 10% week-over-week.

How did mortgage rates react to inflation data?

CPI data from April 2023 showed that inflation slowed last month. This spurred a positive reaction from the bond market, and in turn helped mortgage rates edge downward. The national average for a 30-year, fixed rate mortgage was down 0.11% to 6.57%.* Traders viewed today’s data as a positive step, but many were wondering if this is enough to move rates back below 6%.

How important is location in the current housing market?

Acccording to a recent report from Realtor.com, location matters more now than ever when it comes to buying a home.

In their discussion with Ali Wolf, chief economist of the building consultancy Zonda, “In the [early] pandemic, it didn’t really matter where you were. The housing market was thriving and growing. Since interest rates have risen and inflation is higher and economic uncertainty abounds, we’re reverting back to very localized housing markets.”

Wolf continued to say, “There is no national housing market. Every single city and every single street across the country has its own unique housing market.”

The report also details specific areas of the country that are more affordable than others. Selma Hepp, the chief economist at CoreLogic, stated that, “The Midwest is still full of affordable markets. It’s much more steady than these coastal markets where you have large swings in home prices.


* National average rates accurate as of 5/10/23 from MortgageNewsDaily.com and are not advertised rates from Guaranteed Rate.

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