Mortgage applications are down, but business building is still possible
US mortgage rates have rebounded slightly in recent weeks after falling during the summer, pouring cold water on a hoped-for housing and mortgage market resurgence as many prospective buyers continue to hold off on making a move.
The week ending October 18 saw overall mortgage application volume slide by 6.7% from the prior week, according to the Mortgage Bankers Association (MBA), with the 30-year fixed rate remaining unchanged (6.52%) after climbing in the early part of the month.
Existing home sales have also failed to gather steam, slipping to their lowest level since October 2010 last month as available supply spiked to a near-four-year high.
Still, that’s not to say the rate drops seen in the middle of the year have had no impact on mortgage market activity. Jamie Cavanaugh (pictured top), president at Amerifund Home Loans, told Mortgage Professional America the outlook had improved materially for specific homeowners seeking a refinance. “Our veteran and active-duty military clients who purchased a home in the last year to two years when rates were higher very soon will see – and in some cases already have seen – a rate reduction,” she said.
“The general requirement is the rate has to be at least a half-percentage point less than what they have in order for a refinance to make sense. So we’ve already seen that for some folks, and I believe we’ll see even more of that. I think that you’re going to see a lot of streamline refinances for those veteran and active-duty military folks who bought or financed homes over the last two years.”
First-time buyers see opportunity and challenges in current market
On the purchase side, first-time homebuyers are continuing to show a strong interest in the market, Cavanaugh said, although affordability challenges mean many are turning to downpayment assistance programs and other strategies of putting less money down.
Existing home sales across the US plummeted to their lowest level since 2010 last month, with would-be homebuyers continuing to take a wait-and-see approach in anticipation of lower mortgage rates down the line.https://t.co/ONhPqqCWxX
— Mortgage Professional America Magazine (@MPAMagazineUS) October 24, 2024
Plenty of first-time buyers, meanwhile, are also turning to family to help fund a downpayment or manage that first home purchase. “Right now, we’re seeing more than ever family members gifting downpayment funds to people,” Cavanaugh said. “We’re seeing situations in which a parent is co-signing for their adult child to buy something but not living there. It’s called a non-occupant co-buyer.
“These happen now more prominently because of the affordability issue – so we’re seeing a lot more programs come out to really help homebuyers become homeowners in a cycle where things are just expensive.”
Realtor relationships, database mining key to broker prosperity
Compared to the red-hot activity seen during the COVID-19 pandemic, when rock-bottom rates helped spur frenzied interest in homebuying and refinancing, the overall market remains in something of a lull.
But opportunity will always be there for brokers and loan originators, Cavanaugh said, if they know where to look. “One of the things that I always say is to never stop interacting with real estate agents,” she said, “because when the refinance market picks up, which it will do, oftentimes real estate agents are sort of put on the back burner because right now the business is the refinancing, but purchasing is always happening.
“People are buying homes no matter what the market looks like and those agents are going to have a lot less noise and a lot fewer folks coming to them. And if you’re always the one that’s there front and centre, top of mind to support them through any market cycle, they’re not going to forget that.”
Also essential for brokers, according to Cavanaugh, is mining their databases to identify clients who may be in need of guidance either now or in the near future. “If you haven’t already gone back through your past client database to determine who’s got what and tee them up for the potential to refinance when the time comes, you’re doing yourself a disservice,” she said. “It’s not too late.
“You’ve still got a couple of months left in the year. Get yourself into organization and prep mode, and make sure your business is optimized to help as many people as you possibly can.”
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