According to the latest Freddie Mac PMMS Mortgage Survey, the average 30-year-fixed mortgage rate declined one basis point this past week. This drop comes after nearly a month of consistent increases. The expectation is that mortgage rates will continue to move in concert with the 10-year Treasury yield. If the Federal Reserve continue to raise interest rates, there is a good chance mortgage rates continue to rise also.
Mortgage application volume is up 2.3% from the previous period according to a report from the Mortgage Bankers Association. The amount of purchase applications rose 7.9% from the week prior, while the refinance numbers decreased 3.1%. The average loan size for purchase applications hit a record level this past week, at $418,500. The hot housing market creating higher prices has allowed record setting loan amounts to become more frequent over the last few years.
2021 was another huge year for real estate in all parts of the United States. Specifically, the Southwest Florida real estate market saw higher than average home price increases when compared to the rest of the country. U.S. home prices rose 18.5% year-to-year in Q3 but eight Florida markets saw higher gain than that. Cape Coral-Fort Myers saw the 2nd highest annual gains nationally at 34.7% year-over-year with North Port-Sarasota-Bradenton coming in 8th highest at 25.6%. More notably, the Cape Coral-Fort Myers market saw a 9.8% increase from Q2 to Q3 of 2021.
Overall, the real estate market stayed hot all of 2021 after a record 2020. The low interest rate environment coupled with increased home buying demand created a high level of competition for the already low inventory in Southwest Florida. Historically low interest rates not only allowed more potential home buyers to enter the market, but helped current homeowners save money through refinancing at record volume also. Whether homeowners looked to take cash out of their homes via cash-out refinances or simply just lower their interest rates and monthly payments, 2021 saw nearly 59% of total loan originations come via refinances.
As we head into 2022 low interest rates and high buyer demand should keep the housing market on its current path. As the new year begins and people begin to implement their goals, what do you expect to happen in the housing market?
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Mortgage application volume increased 2% for the period ending December 3rd according to a survey from the Mortgage Bankers Association. Compared to last year, mortgage application volume has dropped across all loan products, but still remains high overall. The main obstacle continues to be lack of inventory creating higher homes prices than some buyers are prepared for. Homebuying activity is still close to the highest levels the market has seen since March. Refinances made up 63.9% of total mortgage applications this past period.
According to a Federal Housing Finance Agency report, home prices posted the largest ever year-over-year gains since the beginning of the FHFA House Price Index. Home prices across the country rose 18.5% this past year. Specifically, the “mountain division”, including Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, and Wyoming, went up 25% in the third quarter of this year. Annual gains can be seen in housing prices in every area of the country in 2021. As has been the case throughout the entirety of 2021, low inventory and high demand continue to play a part in the rising home prices in the United States. While home price increases month to month have started to slow, there is no doubt the demand for housing will remain high going into the new year.
According to a recent report by Redfin, real estate investors spent a record $63.6 billion on home purchases in the 3rd quarter of 2021. This number represents a 78% increase from this time last year. Investors acquired a total of 90,215 homes in Q3 which represents a 80.2% increase from 2020. As increasing home prices are forcing more Americans to consider renting, real estate investors have more opportunities for tenants in their properties. One negative impact that the market is seeing as a result of investors being more active in real estate is the competition this is bringing to individual homebuyers looking to purchase homes. These cash rich investors purchased homes with full cash offers 75% of the time in Q3. Of all real estate transactions in the third quarter of 2021, real estate investors made up 18.2%. This number is considerably higher than last year. In large markets such as Atlanta, Phoenix, and Charlotte investors made up over 30% of all transactions in Q3. As home prices continue to rise and more investors enter the housing market, it may become more difficult for homebuyers to compete for homes throughout the country.
This quarter marked the first time since the pandemic that applications for new purchase mortgages outpaced the application volume for refinances. New home purchase mortgages accounted for 53% of the total application volume in the 3rd quarter. The demand for rate and term refinances decreased 23% year-over-year marking the end of what many would consider a year plus long refinance boom.
According to a report by Corelogic, homeowners gained $2.9 trillion in equity during the second quarter. This $2.9 trillion gain equates to a 29.3% year-over-year increase from 2020. The growth in homeowner equity allows for tens of millions of Americans to feel a higher sense of financial cushion and fend off the fears of foreclosure brought about by the uncertainty of the pandemic. As the housing market continues to stay hot, equity in homes should continue to rise also.
According to John Tedesco, the senior VP of business development at Appraisal Nation, stiffer appraisal regulations and harder entry requirements for appraisers are leading to longer appraisal wait times with higher costs of completion. Because of the high demand for appraisals, appraisal wait times have increased from about five or six days to two or three weeks in some cases. Similarly, the price has risen from between $400-$500 to $700-$800. Appraisal Nation is one of the top appraisal management companies in the United States working with more than 26,000 appraisers every year completing 150,000 residential and commercial appraisals. Since 2013, the number of real estate appraisers has been rapidly falling. In 2013 there were over 89,000 licensed appraisers according to Appraisal Institute, but now there are only about 78,000 with 20% of them being older than 66. As the need for appraisals continues to rise and the work force ages towards retirement, new appraisers are needed to quell the increasing demand.
Mortgage application volume increased 0.3% this past week ending in September 10th. This increase in application volume was led by purchase applications coming in at a much higher level than the previous weekly period. Refinance applications fell by 3% as the purchase applications rose 8%, marking the highest level of purchase mortgage applications since April 2021.
The Sunshine State has seen a vast population increase in recent years, especially in Miami. According to a Redfin monthly migration report, the net inflow of Redfin users moving to Miami was 7,610. Last year during the same month 2,216 people moved to Miami. Of more local relevancy, Cape Coral saw 4,315 Redfin users move to the area, an increase from the 2,778 that moved to Cape Coral in July 2020. The warm weather, beaches, and low taxes are huge factors in the influx of new Florida residents. As we get later into 2021, we can expect to see a high volume of buyers continue to seek Florida housing.
