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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 74 October 2024 J O U R N A L many prospective homebuyers, impacted by a phenomenon called the "lock-in effect," where mortgage rates are prompt- ing many to stay put instead of selling and buying another home at a higher rate. A recent study by Redfin found that 85.7% of U.S. homeowners with mortgag- es have an interest rate below 6%, down from 90.6% at the start of last year, and a record high of 92.8% in mid-2022. This means even more than 85.7% of home- owners with mortgages have a rate below the current weekly average of 6.46%, prompting many to stay put and remain "locked in" to their current rate. "I have a dozen or so homeowners who would like to sell but aren't willing to give up their 3% interest rate for one that's more than twice as high," said Blakely Minton, a Redfin Premier Real Estate Agent in Philadelphia. "Many of those sellers will list if rates get back down to 5%." Expected actions by the Federal Re- serve to cut rates have driven down the 30- year fixed-rate mortgage (FRM) of late, as Freddie Mac reported in its latest Primary Mortgage Market Survey (PMMS) that the FRM averaged 6.35% as of August 29, 2024, down week over week when it averaged 6.46%. A year ago, at this time, the 30-year FRM averaged 7.18%. The dip in rates has forced a slight increase in overall mortgage application volume, as the Mortgage Bankers Asso- ciation (MBA) reports in its latest Weekly Applications Survey for the week ending August 30, 2024, that mortgage applica- tions increased 1.6% from one week earlier. "August closed on a strong note, with mortgage applications increasing 3%, and up for the fourth time in five weeks," MBA President and CEO Robert D. Broeksmit, CMB said. "Borrower demand is returning now that rates are at lows last seen in April 2023. With an expected short-term rate cut from the Federal Reserve later this month, MBA expects mortgage rates to continue to decrease, albeit at a slow pace." The Impact on Housing Supply For Q3, Fannie Mae's Economic & Strategic Research (ESR) Group, led by SVP and Chief Economist Douglas G. Duncan, also surveyed panelists on the impact of potential zoning and permit- ting reforms at state and local levels to increase construction of new homes and, thereby, the supply of homes available to buyers and renters. While most panelists believe that reforms implemented to date are likely to have a positive effect on new construc- tion within the next five years, they were generally split on whether that effect would be "moderate" or "insignificant." A plurality of panelists suggested that hastening the construction permitting process would have the greatest positive impact on housing supply if broadly en- acted, followed by expanding zoning for multifamily housing developments and enabling more "missing middle" or "light touch density" housing construction. However, 63% of panelists are "not confi- dent at all" that the initiatives they think would be most effective will be enacted widely within the next five years. HouseCanary Inc.'s latest August Market Pulse Report found that the nation's housing inventory remains low from a historical perspective; however, it is now at the highest level reported since COVID-19. HouseCanary previously reported that inventory levels were grad- ually approaching pre-COVID levels, and this sentiment remained unchanged in August as total inventory increased by 28.7% from the same period last year. Additionally, contract volume in August 2024 across all price tiers increased compared to August 2023, suggesting a steadier housing market and evidence of demand from potential homebuyers, further demonstrating a seller's market. Jeremy Sicklick, Co-Founder and CEO of HouseCanary, commented: "The past couple of years have seen a housing shortage nationwide. However, consistent with what we have seen throughout this summer, there have been signs pointing to normalization in the housing market since the pandemic when looking at inventory levels, pricing, and contract volumes from a multiyear perspective. Notably, total in- ventory is up 28.7% from the same period in 2023, and up 9.3% from 2022, indicating improvements in the pool of available properties and an eventual neutralization of the housing market. MORE BOOMERS ARE STAYING PUT A cross America, baby boomers continue to make their mark, and their decisions on home- ownership are significantly affecting the housing market. Born between 1946 "I have a dozen or so homeowners who would like to sell but aren't willing to give up their 3% interest rate for one that's more than twice as high. Many of those sellers will list if rates get back down to 5%." —Blakely Minton, Redfin Premier Real Estate Agent in Philadelphia