Hey welcome back as mortgage rates have Been on the rise more people are Deciding to take on a more risky loan Product to buy houses right now I'll Discuss that in today's video plus some Early indications of home buying demand Regarding purchase applications morgage Rates real estate showings and much much More if you guys get any value of Today's video then of course please hit The like button also consider Subscribing as well I post frequent Housing market updates so you guys can Be more informed I actually love making These videos I'm just an analytical Person so I love making these videos any Case the first report I want to discuss Um is this right here this is from the MBA just posted on May 1st which is Today uh this covers the week ended April 26 uh this is a report I cover Each and every week regarding the amount Of people who are submitting loan Applications to buy houses on a national Level that decreased by 2% from one week Ago but it's down 14% on a year- ofe Basis so here's a look at the mba's Purchase index just kind of think of it This way a high number means that more People are submitting loan applications By houses and of course a low number Means just the opposite so for the past Uh month or so the level of purchase Applications has been relatively flat
Which is ironic given the fact we have We're basically in the spring home Buying season right um but also Applications have decreased now for two Consecutive weeks that's over the Previous one year look at the past five Years though you can really see this big Decrease of applications overall in the US they peaked around uh when was this Uh the end of uh January and the Beginning of uh February uh 2021 back then the index was at 334 now it's at 141 so the level of applications right Now is actually less than half uh Compared to to more or less uh early 2021 also going back to the early 1990s You can see the surge of applications That we saw uh back in 2004 and 2005 the Index back then 490 now it's at only 141 so a huge Decrease of applications really ever Since um uh 2021 and the early parts of 2022 and this is very much an early Indication of home buying demand because Of course we see a lack of applications And this implies we'll see a low level Of close home sales in the coming months As well let's get back to the MB support According to their uh senior vice President and chief Economist uh Mike he Said the following inflation remains Stubbornly high and this trend is Convincing markets that rates including
Mortgage rates are going to stay higher For longer we've been talking about that For quite some time right the FED is not Going to decrease rates anytime soon and More uh and because of that we're going To see uh this environment where we have High rates for a long period of time no Doubt this is a headwind for the housing And mortgage markets with a 30-year fix Rate increasing to 7.29% last week the highest levels since November of 2023 let's talk about rates really Quickly um as of May 1st this is According to inves aia.com the average 30-year fix for people with great credit 7.36% The mortgage News Daily at 7.41% that is a uh 10 basis point Decrease compared to yesterday which was On Tuesday if you're looking at FHA or a VA loan you're going to be around 6.9% also one year ago not that one year Ago which is right here uh the average 30-year fix rate was at 6.73% so rates have increased by Approximately 68 basis points compared To 12 months ago going back to the MB Report it says application volume for Purchases and refi decreased over the Week and remained well below last year's Pace again down by 14% for purchase Applications and refi actually uh Decreased by 1% from one year ago one
Notable Trend that I mentioned the very Beginning of this video is that the arm Share of activity in other words an Adjustable rate mortgage in which you Have a teaser rate in which your rate is Fixed for a short period of time then Your rate becomes variable thereafter The has reaches highest level for a year At 7.8% so out of all the applications For mortgages 7.8% is a share of adjustable rate Mortgages perspective home buyers are Looking for ways to improve Affordability and switching to an arm is One means of doing that yet a risky loan Product in my opinion uh with arm rates In the mid 6% range for loans with an Initial period of about five years let's Talk really briefly about this because The average 30-year fix rate according To the m um is at where was it at right Here uh increase to 7.29% looking at a 51 arm in other words The rate is fixed for five years then it Becomes variable thereafter and the rate Adjusts or adjusts every year thereafter Uh is at 6.60% Quite a bit less than the 7.29% for an average 30-year fix so let Me give you guys an example Regarding Why people would decide to go to an arm Versus a 30 or a 15-year fix so let's Just say someone's buying a $500,000 Home putting 5% down your loan amount
Would be 475,000 at the 7.29% 30-year fix rate your housing Payment would be $3,253 per month I'm excluding taxes Insurance and HOA I only want to look at The difference between uh a rate at 7.29% compared to 6.6 so at 6.6% you're looking at housing payment At $3,033 per month that's approximately $200 less than in average 30-year fixed Rate mortgage so because we have this You know giant housing affordability Issue right now we're seeing interest Rates overall increasing and very close To about a 5 Monon high at around 7.4% this means that more people are Deciding do a 51 arm or a 71 arm in Adjustable rate mortgage in order to Have a lower housing payment and again In my opinion this is a much risky loan Product because your principal interest Payment is only fixed for that teaser Rate and then adjust therea much Different compared to a 30-year fix rate In which your principal and interest Payments is fixed over the life of that Loan all right Sheen cheers uh slightly Here and talk about the amount of real Estate showings across North America This is according to showingtime.com the Most recent dat that we have from them Is through April 30th the week ended
April 30th uh this year uh real estate Shs compared to the first week this year Are up by 31.5% at this time last year we saw an Increase of 27.4% compared to the first week last Year and in 2022 we were up by 20% 2021 Up by 44.5% compared to the first week that Year so the 31.5% uh gain we're seeing year-to dat So far this year is the highest Percentage increase since 2021 Also Let's have a look at the number of People who are searching for homes for Sale on Google uh the interest over time Right now the index I should say is at 70 one year ago we're at 90 this means There's approximately 22% less interest For people searching for homes for sale On Google uh right now and lastly let's Have a look at the uh CME watch Tool uh This is the likelihood of changes to the Federal funds rate uh by the FED uh the FED actually was announced today which Is on May 1st that they kept the federal Funds rate at 5.5% the next meeting which is is on uh June 12th uh again a high high Likelihood a 91% probability they're Going to keep rates the same at 5.5% we're seeing exactly the same in uh July 31st then in September uh a 46.2% chance we're going to be at the
Same rates again at 5.5% uh this rate by the way is the Federal funds rate which is the rate That the FED um uh changes and this is The overnight rate that Banks uh charge Each other due to overnight lending uh The when the FED increases or decreases The fidal friends rate that does impact Mortgage rates though that's why I want To talk about this in today's video when Looking at um September 18th though There is a 42.6% chance they're going to decrease Rates by 25 basis points down to 5.25% then in November um a 43.7 % chance we're also Going to be at 5.25% again a 25 basis point rate Decrease compared to the 5.5% rate we're seeing today then by the End of the year this is where it gets Interesting and of course this is going To change and does change virtually Every single day um based on incoming Data but something I found to be really Interesting though is that the street This forecast is basically calling only For one rate decrease this year year so By the end of the year at 5.25% that is a 39% chance we're going To be at the same rates or about a 25 Basis point rate decrease compared to The rates we're seeing today um fast Forward not fast forward going back to
About six months um the overall forecast Was the Fed was going to decrease rates By about four times by about one full Percent point this year and they were Calling for the FED a decrease rates Starting in March this year and now We're in May and no rate decreases um in The foreseeable near future uh so very Big changes here now something else that Caught my attention as well again right Now we're at 5.5% this is something new There's a 19.3% chance we're going to be At the same rates we're seeing today by The end of the year so we could be in a Scenario in which we don't get any rate Cuts whatsoever this year um because There is a 19% chance right now based on The data we have right now that we're Going to be at the same rates that we Have today by year end now this is Vastly different compared to just one Month ago one month ago the chance of That only 2% now it's at 19% I think we All can agree we're going to be in this Higher for rate um environment in which Rates are going to be um higher for a Longer period than what was previously Expected and of course that could take The wi out the sales during this home uh Spring home bind season and we're going To see this um you know higher rate Environment for um home buyers as well And that will likely impact or Negatively impact home sales in
2024 and with that said if you guys got Any value of today's video then please Hit like button I appreciate that of Course appreciate you also consider Subscribing as well also if you guys Want a real estate agent referral Whether you're looking to buy or sell a House anywhere across the United States Then check out my website which is real Estate TEF finder.com hope you guys have An awesome day and look forward to Seeing you on the next video [Music] [Music]
