Rising interest rates and increasing home prices are leading to a significant dip in new residential loans, according to a local loan officer and sales manager.
A combination of interest rates …
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Rising interest rates and increasing home prices are leading to a significant dip in new residential loans, according to a local loan officer and sales manager.
A combination of interest rates and inflation have had a negative impact on new residential loans in the Valley, said Matthew Belmont, a loan officer and sales manager at Primary Residential Mortgage Inc. in Scottsdale.
On Thursday, the Associated Press reported “four big banks reported noticeable declines in their first-quarter profits Thursday, as the volatile markets and war in Ukraine caused deal-making to dry up while a slowdown in the housing market meant fewer people sought to get a new mortgage or refinance.”
A day earlier, banks that included Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo reported similar results to JPMorgan Chase, which saw a double-digit decline in profits, the story said.
Belmont said rising interest rates, largely due to inflation, have had homebuyers pull back. Higher interest rates can equate to higher monthly payments for buyers.
“Interest rates rising definitely are having an impact on the amount of loans getting done,” Belmont said.
High interest rates, volatility, competition and a historically low inventory of homes all have had a negative impact on the mortgage industry, said Lizy Hoeffer, senior loan officer at CrossCountry Mortgage in Phoenix.
Many potential buyers are either priced out or may decide to wait to buy because of buyer fatigue from tough competition, Hoeffer said.
“We have been flooded with all kinds of volatility in the market,” Hoeffer said.
From Jan. 1 to April 15 year-over-year, Hoeffer said the amount of closed deals at her office has declined by 30% from 393 last year to 275 this year. She said a 30% decrease in closed deals is “on par” for the entire mortgage industry.
Brutal competition where buyers flash cash for a home sale or offer thousands more can take some potential buyers out of the game. According to the Arizona Department of Housing, an estimated 250,000 to 270,000 new housing units of “all types” are needed statewide to meet current demand.
“Lack of inventory means not everyone gets a home,” Hoeffer said.
Interest rates going up means purchasing power for individuals is going down, Belmont said.
Mortgage rates have gone up in recent weeks, making home buying more expensive. It’s the impact of the Federal Reserve increasing the benchmark rate, which the Fed likely will continue to do in its battle with inflation.
Belmont said mortgage interest rates have increased by 2% over the past few months.
Last month, the average 30-year mortgage interest rate rose to 4.16%, according to an Associated Press report. That’s the first time they’ve crested 4% since May 2019, according to Freddie Mac.
Last March, the average 30-year mortgage rate was at 3.09%.
In February, the Associated Press reported sales of previously occupied U.S. homes fell as “competition for a near-record low number of properties on the market drove prices higher and rising mortgage rates kept would-be buyers on the sidelines,” the story said.
A combination of low inventory and higher interest rates is pushing the cost of buying a home higher, Belmont said.
“That 2% is definitely impacting what people qualify for,” Belmont said.
The uneasy market is causing some buyers to bow out.
Hoeffer said the market might not transition to a buyer’s market for another six to 18 months. But the current crunch of paying more from everything from gasoline to food could lessen demand.
“People’s ability to get under contract right now is really tight,” Hoeffer said.
Brent Ruffner Lead News Reporter | Daily Independent @AzNewsmedia
Journalism has fascinated Brent Ruffner since junior high school.
Since 2001, his stories have been published in newspapers from the Albuquerque to the Arizona and he has always had a knack for making sure his facts are right and his words are to the point.
Growing up, Brent watched as sports reporters covered his beloved Phoenix Suns, a team he followed since Charles Barkley first arrived in Phoenix via trade in 1992. Sports reporting was a dream back then.
But after gaining some writing experience, Brent found a love for news instead of covering different types of sports. In 2008, he moved to New Mexico and covered crime, schools and city beats all while holding elected officials accountable.
He covered stories that ranged from a DEA drug bust gone bad to an award-winning story on school lunches.
In Arizona, Brent was a freelance writer who covered everything from the importance of citrus in the state to Esteban owning a store in downtown Prescott.
Brent is a 2007 graduate of the Walter Cronkite School of Journalism and Mass Communication at Arizona State University.
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