As housing cools, mortgage loan size falls
The average mortgage loan amount is down markedly from its peak in mid-March
Redfin CEO Glenn Kelman provides insight into how inflation is deeply impacting the housing market and why he laid off 8% of workers in his company.
The average loan amount for a home mortgage in the U.S. is down markedly from the high in mid-March, indicating that the housing market is cooling as interest rates rise.
A "For Sale" sign in Crockett, California, US, on Tuesday, June 14, 2022. The number of home sellers lowering prices has reached the highest level since October 2019, the latest sign that the housing market is slowing from its once-frenzied pandemic … (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
The Mortgage Bankers Association's latest Weekly Mortgage Applications Survey released Wednesday shows the average loan size was at $422,100 for the week ending June 17. That's up slightly from $419,000 the week before, but down significantly from the $460,100 record for the survey ending March 18.
HIGH MORTGAGE RATES, DECLINING BUDGETS INDICATE HOME-PRICE GROWTH TO SLOW IN COMING MONTHS
"The average loan size, at just over $420,000, is well below its $460,000 peak earlier this year and is potentially a sign that home price-growth is moderating," said Joel Kan, MBA's associate vice president of economic and industry forecasting.
A sold sign sits in front of a house in Brighton, N.Y. (Associated Press / AP Newsroom)
"Purchase applications increased for the second straight week – driven mainly by conventional applications – and the [adjustable rate mortgage] share of applications jumped back to over 10 percent," Kan said. "However, purchase activity was still 10 percent lower than a year ago, as inventory shortages and higher mortgage rates are dampening demand."
"Mortgage rates continued to surge last week, with the 30-year fixed mortgage rate jumping 33 basis points to 5.98 percent – the highest since November 2008 and the largest single-week increase since 2009," Kan explained.
A project manager moves a "Sold" sign near home construction sites in Kyle, Texas. (Matthew Busch/Bloomberg via Getty Images / Getty Images)
He added, "All other loan types also increased by at least 20 basis points, influenced by the Federal Reserve’s 75-basis-point rate hike and commentary that more are coming to slow inflation."
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Kan noted, "Mortgage rates are now almost double what they were a year ago, leading to a 77 percent drop in refinance volume over the past 12 months."