Housing Beat: Mortgage Rates Keep Climbing; Disney's Affordable Housing Project

Mortgage rates are continuing their upward motion while potential homebuyers and sellers face a shifting housing market and the affordable housing sector welcomes a well-known new participant.

The Home Loan Situation: Freddie Mac FMCC reported the 30-year fixed-rate mortgage average 4.72% for the week ending April 7, up from last week when it averaged 4.67%.

The 15-year fixed-rate mortgage averaged 3.91%, up from last week when it averaged 3.83%. And the five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.56%, up from last week when it averaged 3.5%

“Mortgage rates have increased 1.5 percentage points over the last three months alone, the fastest three-month rise since May of 1994,” said Sam Khater, Freddie Mac’s chief economist. “The increase in mortgage rates has softened purchase activity such that the monthly payment for those looking to buy a home has risen by at least 20% from a year ago.”

As mortgage rates were rising, mortgage applications were going in the opposite direction. The latest data from the Mortgage Bankers Association (MBA) saw a 6.3% decrease for week ending April 1 from the previous week.

“As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The refinance share of all applications dipped to 38.8%, down from 51% a year ago. The hot job market and rapid wage growth continue to support housing demand, despite the surge in rates and swift home-price appreciation.

“However,” Kan continued, “insufficient for-sale inventory is restraining purchase activity. Additionally, the elevated average purchase loan size, and steeper 8% drop in FHA purchase applications, are both indicative of first-time buyers being disproportionately impacted by supply and affordability challenges.”

See Also: Benzinga's "The Crisis In Housing," an original four-part series

Another Imbalance: The shortage of homes for sale might be alleviated later this year, according to data from Realtor.com, a unit of News Corp’s NWS NWSA subsidiary Move.

In a new survey, 64% of prospective sellers anticipated putting the property on the market within the next six months, and with high expectations for making a profit.

"While sellers are expected to hold the upper hand in 2022, navigating the listing process remains a challenge — particularly for those also buying in today's fast-paced market," said George Ratiu, senior economist and manager of economic research at Realtor.com. "Homeowners who are ready to move forward with pandemic-delayed plans will find plenty of opportunity this spring and summer. Although accelerating inflation is leading to higher housing costs and living expenses, many buyers remain interested in finding a home.

“At the same time,” Ratiu added, “recent housing trends suggest demand is beginning to moderate as higher mortgage rates push monthly payments out of some buyers' budgets, underscoring the long-term need for more affordable inventory."

A separate study by the brokerage Redfin RDFN finds fewer people are starting online home searches and applying for mortgages than this time last year, with year-to-date growth in home tours far below 2021 levels.

“Homebuyers may not feel like the market has gotten any easier — that’s because they’re often competing against investors, all-cash buyers and migrants from expensive cities who aren’t as sensitive to mortgage rates,” said Redfin Chief Economist Daryl Fairweather. “But there are early indicators that the market is turning, and we expect the softening to become more apparent in the coming weeks, eventually causing home-price growth to slow. We’ll be watching closely to see whether the market slows from 100 miles per hour to 90 or 100 miles per hour to 75.”

See Also: Top 10 States People Are Moving To And Leaving From

Making Florida Affordable: A prominent entertainment company has put forth a bold new endeavor for the affordable housing sector: The Walt Disney Co. DIS announced plans for an 80-acre affordable housing development near the Walt Disney World Resort in Orlando.

“The development, which is expected to include more than 1,300 units, will be constructed by a third-party affordable housing developer and will be located on Disney’s land in southwest Orange County, Florida,” said Rena Langley, Walt Disney World’s senior vice president for communications and public affairs.

“It will offer Central Florida residents a variety of home choices that are affordable and attainable, in a great part of town near schools and the new and expanding Flamingo Crossings Town Center retail and dining complex. The development will be available for qualifying applicants in our region, including Disney cast members.”

Langley did not provide a timeline on the project, although she noted this endeavor was “in the works for a while as we’ve been focused on finding solutions to this challenge for quite some time.”

Photo: Lali Masriera/Flickr Creative Commons.