With mortgage prices peaking and Hurricane Ian’s destruction settling, mortgage application numbers have dropped.
An Oct. 5, 2022, report by The Mortgage Bankers Association (MBA) said that mortgage application volume fell 14.2% from the previous week, reaching the lowest level since 1997.
“The 30-year fixed [interest] rate hit 6.75% last week, the highest rate since 2006,” said Joel Kan, MBA’s vice president and deputy chief economist. “The steep increase in rates continued to halt refinance activity and is also impacting purchase applications, which have fallen 37% behind last year’s pace.”
Refinance volume dropped 18% from the previous week, an 86% decrease from its rate last year.
While these are nationwide trends, Kan points to Hurricane Ian as one cause.
“Applications in Florida fell 31%, compared to 14% overall, on a nonseasonally adjusted basis,” he said.
While the storm proved destructive to many in its path, disasters are expected. Nick Grandy, construction and real estate senior analyst at RSM US, says the construction worker shortage is adding cost to those rebuilding after the storm.
“The need to aid Florida could have a ripple effect in supply and demand of the skilled labor market and lead to higher prices for construction workers to combat the needed repairs from the hurricane,” said Grandy.
He believes that even though there is a high demand for construction workers across the country, the opportunity to help Florida rebuild will attract potential workers to the area.
“Additionally, it is likely that projects that were recently started or scheduled to start in the coming months were canceled or postponed, freeing up some workers, materials and equipment, if not damaged, that otherwise would not have been available. This may provide some help in the area, but demand will likely outweigh this supply, leading to higher prices for laborers with the rebuild,” he said.
With mortgage interest rates so high, many are left feeling discouraged from the idea of buying a home.
“With the rise in interest rates, there are fewer people buying homes, and there are also significantly fewer refinancings occurring, as many people locked in lower rates over the past two years when mortgage rates were at record lows. This is driving down mortgage applications to levels not seen since the 1990s,” said Grandy.
“This, coupled with material prices, which saw extreme escalation, may dissuade some owners [of storm-damaged homes] from wanting to rebuild, and some may instead list their property for sale as home and land prices are at or near record highs,” he said.
Grandy does not anticipate a long-term effect on the Florida housing market.
“Storm and flood risks have always been present for coastal properties in Florida, yet the demand and valuation of these properties have only continued to increase,” he said. “Hurricane Ian may be a deterrent to some, but as with previous hurricanes, transaction volume and home prices take a brief hit and recover within months.”
