Mortgage Rates Pause from their Ascent

The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession. This pause in rate activity should help the housing market rebalance from the breakneck growth of a seller’s market to a more normal pace of home price appreciation.

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Wells Fargo CEO: ‘Real-estate values moderating in the long term are a good thing’

Mortgage rates have risen, slowing down activity in the housing sector. Wells Fargo — along with many other companies — is trimming staff, in response to the grimmer economic outlook.

“Real-estate values moderating in the long term are a good thing,” Charlie Scharf, CEO of Wells Fargo WFC, -1.28%, said during the Aspen Ideas Festival, a CNBC event, although he acknowledged that this was bad for the bank’s business.

Scharf said it will help ease pressures on inflation, which are being particularly felt in more expensive monthly rents and higher mortgage repayments due to rising interest rates. He added: “But it’ll be messy going through it.” 

Inflation rose by 8.6% on the year in May to a 40-year high, led by the higher cost of gas and food. The core rate of inflation — stripping out food and energy costs — rose 4.7% in May from a year ago.

The housing finance industry is shaking from the Federal Reserve’s 0.75 percentage point hike in June. Lenders from Wells Fargo to JPMorgan JPM, -2.50% to real-estate companies like Redfin RDFN, -3.49% and Compass COMP, -1.84% are laying off staff.

“We’re seeing a huge decline in terms of just mortgage applications,” Scharf said. “Our mortgage revenues will be down 50% from the first quarter to the second quarter.” 

The limited supply of housing and more expensive financing will still mean housing is less affordable for a “broad group of people,” Scharf said, but he added this will not impact all homebuyers equally, and will hit lower-income households harder.

“I hate to sound like a broken record, but the people who are at the lower end of that are the ones who that impacts the most,” he said. “They don’t have reserves, they can’t stretch [their finances], it’s harder for them to get credit.”

Refinancing activity is up 2% week-over-week, but down 80% compared to the same period last year. Mortgage applications were slightly up for the week ending June 24, according to the Mortgage Bankers Association

Original Article

Mortgage Rates Surge on Inflation Expectations

Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987. These higher rates are the result of a shift in expectations about inflation and the course of monetary policy. Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.

All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution. Alteration of this document or its content is strictly prohibited. © 2022 by Freddie Mac.

Monthly Market Overview North San Diego County May 2022  

After two years of record-setting activity, there are signs the housing market might be cooling. High home prices and a surge in mortgage interest rates are slowing buyer activity, with home sales declining for the third consecutive month under the weight of soaring homeownership costs.

The National Association of REALTORS® (NAR) reports existing home sales were down 2.4% from the previous month, while pending sales fell 3.9% as of last measure, extending the trend of recent months. Economists predict sales will continue to soften in the near future, which may put downward pressure on home prices.

  • Closed Sales decreased 15.8 percent for Detached homes and 7.0 percent for Attached homes.
  • Pending Sales decreased 29.2 percent for Detached homes and 10.8 percent for Attached homes.
  • The Median Sales Price was up 15.8 percent to $1,100,000 for Detached homes and 18.6 percent to $700,000 for Attached homes.
  • Days on Market decreased 31.3 percent for Detached homes but remained flat for Attached homes.
  • Supply decreased 7.1 percent for Detached homes and 9.1 percent for Attached homes.

The slowdown in sales has provided a much-needed lift to housing supply, with inventory up 10.8% from the previous month according to NAR, although supply remains down 10.4% compared to this time last year, with only 2.2 months’ supply of homes at the current sales pace.

San Diego North County Monthly Housing Market Indicators May 2022

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