Black Knight, now a subsidiary of Intercontinental Exchange, says there are some concerning statistics about the state of the housing market and mortgage rates for August 2023, including the third monthly drop in rate locks.
According to the Optimal Blue Mortgage Market Indices, the 30-year conforming rates soared to a staggering 7.25% in August – the highest in over 20 years. While it slightly decreased to 7.07% at the month's close, the implications for potential homebuyers are significant.
“August was another rough month for mortgage borrowers from an interest rate perspective,” said Andy Walden, vice president of enterprise research and strategy at Black Knight, now a part of ICE. “Indeed, 30-year conforming rates reached as high as 7.25% late in the month, hitting their highest point in more than 20 years. Current housing market dynamics continue to put a damper on mortgage demand. Rates did edge down toward the end of August, but prospective homebuyers still face the least affordable housing market in nearly 40 years.”
Key findings from the Originations Market Monitor report include:
- A 1.5% decline in rate lock volumes, marking the third consecutive monthly drop.
- A significant 22% year-on-year decrease in purchase lock counts, plummeting 34% compared to pre-pandemic figures in August 2019.
- Down payments are on the rise, loan-to-value ratios are shrinking, and credit scores have been climbing, indicating a more stringent credit environment.
- The average purchase price for homes dipped for the second month in a row, with the figure settling at $450K in August. Concurrently, the average loan amount recorded was $352K.
- Adjustable-rate mortgages (ARMs) lost their appeal, constituting only 6.56% of August's lock activity, as fixed products now offer more competitive rates.
“From what the data is showing us, much of this still very scarce activity is occurring among first-lien holders with older mortgages, or with particularly low balances, for whom today’s rates become less of an issue," Walden said. "With the purchase market essentially gridlocked, but homeowner equity within inches of an all-time high, we’ll continue to keep a close eye on the market for further signs of whether, how and to what degree American homeowners access that equity.”
The overall sentiment suggests a tough road ahead for homebuyers, with climbing interest rates and an affordability crisis presenting major hurdles. With homeowner equity nearing record highs, the focus will shift to how and when Americans decide to leverage this equity in the future.
