On the Mortgage Front

Freddie Mac (OTCMKTS:FMCC) reported the 30-year fixed-rate mortgage averaged 6.70% as of Sept. 29, up from last week when it averaged 6.29%. The 15-year fixed-rate mortgage averaged 5.96%, up from last week when it averaged 5.44%. And the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.30%, up from last week when it averaged 4.97%.

“The uncertainty and volatility in financial markets is heavily impacting mortgage rates,” said Sam Khater, Freddie Mac’s chief economist. “Our survey indicates that the range of weekly rate quotes for the 30-year fixed-rate mortgage has more than doubled over the last year.

This means that for the typical mortgage amount, a borrower who locked-in at the higher end of the range would pay several hundred dollars more than a borrower who locked-in at the lower end of the range. The large dispersion in rates means it has become even more important for homebuyers to shop around with different lenders.”

Mortgage application activity reversed course from last week’s uptick and resumed a downward trajectory. The Mortgage Bankers Association’s (MBA) Market Composite Index fell by 3.7% on a seasonally adjusted basis from one week earlier. The Purchase Index dipped 0.4% and the Refinance Index sank by 11% and was 84% lower than the same week one year ago.

“Applications for both purchase and refinances declined last week as mortgage rates continued to increase to multi-year highs following more aggressive policy measures from the Federal Reserve to bring down inflation,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

“Additionally, ongoing uncertainty about the impact of the Fed’s reduction of its MBS and Treasury holdings is adding to the volatility in mortgage rates.”

The tumult in the mortgage market is having a dent on homebuyers’ wallets. Redfin (NASDAQ:RDFN) reported the average buyer who started searching in July and closed the deal on their new home in September saw a potential mortgage rate fluctuation by roughly half of a percentage point every four weeks.

For example, someone seeking a $500,000 home would have expected monthly payment of $3,051 in early July, but by late September that would have been $3,202.

“The challenges homebuyers face in today’s market go beyond the dwindling affordability caused by high mortgage rates and home prices,” said Redfin Deputy Chief Economist Taylor Marr. “The whiplash in mortgage rates between when homebuyers set their budget and when they make an offer is also making it extraordinarily difficult to plan ahead.”

On the Homebuying Front

The National Association of Realtors (NAR) reported the third consecutive month of declines in pending home sales.

NAR’s Pending Home Sales Index fell from July by 2% to 88.4 in August, while the year-over-year difference was a 24.2% plummet. An index of 100 is equal to the level of contract activity in 2001.

“The direction of mortgage rates – upward or downward – is the prime mover for home buying, and decade-high rates have deeply cut into contract signings,” said NAR Chief Economist Lawrence Yun. “If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilize.”

But while pending sales were down, buyers had a greater selection of properties to choose from. Realtor.com reported the housing inventory level increased 26.9% year-over-year in September. However, yearly listing price growth remained in the double-digits in September (13.9%).

“Home prices have been remarkably resilient so far this year, considering the impact that inflation and climbing rates are having on buyers’ budgets. Recent data does show some deceleration in listing prices, and a seasonal pull back that is typical of this time of year.

On the flip side, this cooling is likely one reason why fewer sellers entered the market in September,” said Danielle Hale, Chief Economist for Realtor.com.

Realtor.com is operated by the News Corp (NASDAQ:NWS) (NASDAQ:NWSA) subsidiary Move Inc.

This article originally appeared on ValueWalk

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