“Tanking” perfectly describes the earliest months of 2023’s homebuying season.
Homebuyer confidence is the lowest I’ve ever experienced in my 35-year mortgage originator career. The current market makes the Great Recession sales days seem like a stampede. Few want to buy right now. Only the most motivated are pulling the trigger.
RELATED: Mortgage costs are locking out California homebuyers
On Feb. 15 the purchase index plunged 43% lower than one year ago, according to the Mortgage Bankers Association.
“Purchasing applications dropped to their lowest level since the beginning of this year and were more than 40 percent lower than a year ago,” said Joel Kan, deputy chief economist at the MBA. “Potential buyers remain quite sensitive to the current level of mortgage rates, which are more than 2 percentage points above last year’s levels and have significantly reduced buyers’ purchasing power.”
READ MORE: Home prices dropped in 90% of U.S. markets in 2nd half
Mortgage payment affordability is just the tip of the inflation iceberg. The Consumer Price Index jumped 0.5% in January after increasing just 0.1% in December, the Bureau of Labor Statistics reported. Undoubtedly, this means mortgage rates are increasing and home prices will go into a steeper descent.
Everything from eggs, energy and insurance is eating into hard-earned paychecks. As he sees it, Fed Chair Jerome Powell isn’t going to be happy until he raises rates high enough to get inflation under control. That’s a job killer. That also portends a consumer confidence spiral.
Similar to goal-setting and working toward a job promotion or a pay raise, now is an excellent time to prepare for your first or your next property purchase.
Do not expect mortgage rates to significantly improve until late 2023. Don’t be surprised if mortgage rates hit 7% between now and summer. Do not expect home prices to find a bottom until early 2024. Prep time is on your side.
MORE ON COST OF LIVING:
Read the full article here
