Mortgage applications tick up after drop in sales in 2022

RALEIGH, N.C. (WTVD) -- As mortgage rates have slowly dropped from a 20-year high in October, buyers appear to be showing interest in re-entering the market.

"Over the last month or so, we've seen a tremendous uptick in applications as the interest rates have started to fall," said Karen Williams-Jones, a branch manager for Mortgage Solutions Financial.

The NC State alum has been in the mortgage industry for 25 years and discussed the increased interest in Raleigh during that period.

"Over the recent several years it's been a quick uptick. But prior to that, it was just (a slow build-up)," said Williams-Jones.

The 30-year fixed rate mortgage average is 6.12%, with rates increasing for the first time in a month according to data from Freddie Mac. In October, that rate topped 7% for the first time since 2002;

Williams-Jones said as they approached the 6% rate again, buyers became more interested.

"Depending on where you stand credit-wise, you can get down into the mid to low five with a 1% discount or so, and those people who have the financial capacity to pay a little additional in closing costs will pay it in order for those payments to align with what they're comfortable with," said Williams-Jones.

Mortgage rates still remain elevated; from December 2008 to September 2022; average 30-year fixed mortgage rates did not top 6%. Furthermore, between February 2011 and March 2022, average 30-year fixed mortgage rates did not top 5%. However, Freddie Mac data dating to 1971 showed interest rates did not fall below 5% until 2009.

"People who were sitting on a mortgage of 3% weren't really moving up or down at that point. So now with rates kind of settling down in the sixes, we are starting to see that move-up buyer re-enter the market," said Gretchen Coley, founder of The Coley Group at Compass. "And we're putting a lot of those folks under contract at this point in time because they see a huge buying opportunity with the ability to negotiate prices, terms and concessions, even though they're paying a slightly higher rate."

According to Triangle MLS, the median sales price in the Triangle increased by $57,000 in 2022, despite there being more than 6,000 fewer closed sales. The rising interest rates, combined with rising house prices, led to a smaller buyer pool, though both could be changing, as Triangle MLS found the rate of pricing increases cooled considerably in the final quarter of 2022.

"Folks who have a home currently in this market are still going to be able to demand a high price. Is it going to be the same price they might have seen first and second quarter of 2022? Probably not. But they're still going to be strong demand is still high and supply is still really low," said Coley.

She said they saw a lot of out-of-state buyers in the last half of 2022.

"We have to look at economic indicators, job reports, interest rates. We have to look at all of those factors. And the fact of the matter is, is we are still a very desirable city," Coley noted.

Coley explained that inside-the-beltline housing remains in demand, but neighboring cities and counties are drawing increased interest.

"(If) you're looking for something in the ($400,000s), you have to move out a little bit further. You can still get it. You can get a great home, but it's not going to be, you know, walking distance to North Hills or anything of the sort. So we are seeing that divide. And I think the people who are who grew up here in Raleigh are having a hard time," said Coley, who emphasized the need for more housing to keep up with population growth.

"I'm seeing more (mortgage applications) in the Triangle area than some of the other states (I'm licensed in). I think we have a wonderful real estate market here, and we're seeing the influx and increase in population because Raleigh, Durham, the Triangle, has so much to offer," said Williams-Jones.