Mortgage rates fell last week, but demand for home loans didn’t move higher as a result. Other aspects of today’s housing market are outweighing the benefit of lower mortgage rates right now, namely a lack of supply.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.40% from 6.45%, with points falling to 0.59 from 0.62 (including the origination fee) for loans with a 20% down payment. It had been over 7% just a month ago.

Mortgage applications to purchase a home, however, dropped 4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was 35% lower than the same week one year ago.

“Spring has arrived, but the housing market is missing the customary burst in listings and purchase activity that typically mark the season. After four weeks of increasing purchase application activity, volume declined a bit this week even with another small drop in mortgage rates,” said Mike Fratantoni, MBA’s chief economist.

New listings were down 20% year over year in March, according to Realtor.com, and total inventory was about half of what it was in March 2019, pre-Covid pandemic.

“Although the mortgage rate for conforming balance loans declined by five basis points over the week to 6.40%, the mortgage rate for jumbo loans increased by nine basis points to 6.36%,” added Fratantoni. “While we have seen relative weakness at the high end of the housing market in recent months, the divergence in rates suggests that banks may be tightening credit in response to recent challenges, preserving balance sheet capacity as deposit balances have declined.”

• Residential solar power can lower a homeowner’s carbon footprint, but crucially, also save money in the long-term.
• But a major decision by California’s utility regulator to cut back on net metering, which will reduce the total savings homeowners can make by selling energy to the grid by as much as 60%, changes the economic equation and could have national ramifications.
• Storing electricity in a solar-powered battery, as energy storage costs come down, can make up for net metering reductions, but have a decade-long payback period.
• Local and state tax credits and the Inflation Reduction Act are shortening the payback period for solar installation costs.

California had among the most generous rules of all until this week. But state utility regulators agreed to let utilities pay much less for excess power they are required to buy, after power companies argued that the rates were too high, and raised power prices for other customers.

Wood Mackenzie said the details of California’s decision made it look less onerous than the firm had expected. EnergySage says the payback period for California systems without a battery will be 10 years instead of six after the new rules take effect in April. Savings in the years afterward will be about 60 percent less, the company estimates. Systems with a battery, which pay for themselves after 10 years, will be little affected because their owners keep most of their excess power instead of selling it to the utility, according to EnergySage. 

“The new [California rules] certainly elongate current payback periods for solar and solar-plus-storage, but not by as much as the previous proposal,” Wood Mackenzie said in the Dec. 16 report. “By 2024, the real impacts of the IRA will begin to come to fruition.”

The more expensive power is from a local utility, the more sense home solar will make. And some contractors will back claims about power savings with agreements to pay part of your utility bill if the systems don’t produce as much energy as promised. 

“You have to do your homework before you sign,” Hurwitz said. “But energy costs always go up. That’s another hidden incentive.”

California Public Utilities Commission subsidy cuts for new Net Energy Metering customers don’t go as far as utilities wanted, but too far for solar industry.

The California Public Utilities Commission on Thursday overhauled its rules for rooftop solar power, slashing subsidies for new solar installations while providing incentives for customers to add battery storage to their systems.

Commissioners approved a complicated new 260-page framework on a 5-0 vote, saying the changes will shift costs from non-solar users and promote grid reliability.

At issue is NEM, or Net Energy Metering — the rules that determine the size of the credits customers receive on their utility bills when their rooftop solar systems generate more energy than they consume. Roughly 1.5 million customers in the state have installed rooftop solar on their homes and businesses.

California’s NEM rules had not been updated since 2016. Solar advocates said the state needs to continue offering strong subsidies to encourage the transition to clean energy. Critics said the existing rules unfairly burdens non-solar customers — especially lower-income residents — with the rising costs of maintaining the power grid.

“This decision is about encouraging solar and storage but also, fundamentally, about the right way to charge NEM customers for use of the grid,” said Alice Busching Reynolds, president of the utilities commission, known as the CPUC for short.

The new rules — known as NEM 3.0 — include $900 million in upfront incentives for customers to pair solar with battery storage systems, with $630 million set aside for low-income customers. The CPUC estimates the new rules will save average residential customers with solar-plus-storage at least $136 a month on their utility bills.