Rural Home Buyers Break From America’s Housing Market Trend – Newsweek

The share of government-supported mortgages aimed at helping home buyers in rural areas rose slightly for the week ending May 24, even as other categories and overall applications dipped, according to the latest survey from the Mortgage Bankers Association.

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U.S. Department of Agriculture loans ticked up to 0.4 percent from 0.3 percent as a share of total applications for the week.

Overall, mortgage applications across the board fell nearly 6 percent as the effects of elevated mortgage rates hit the housing market, depressing activity during the Spring season, which is often a time where the housing market is at its busiest. Refinancing also plunged 14 percent, MBA pointed out in a statement shared with Newsweek.

Other loans, including Federal Housing Administration (FHA) loans assisted by the U.S. Housing and Urban Development (HUD) and Veterans Affairs (VA) loans, declined. The FHA share of the loans dropped to 12.7 percent for the week ending May 24, down from 12.8 percent the week prior. VA mortgages fell to 12 percent from 13.7 percent the previous week, according to MBA data.

“USDA-guaranteed mortgages maintained their market share last week because they’re a good deal,” Holden Lewis, a home and mortgage expert at NerdWallet, told Newsweek. “They don’t require a down payment, so they’re suited to buyers who lack money for a down payment. And the interest rates are competitive. There’s strong demand for housing in rural areas, and eligible borrowers are interested in these loans.”

Newsweek contacted MBA for further comment via email on Wednesday.

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Contributing to the drop in applications, mortgage rates jumped to above 7 percent, with the 30-year fixed rate going up for the first time in four weeks, Joel Kan, MBA’s deputy chief economist said in the statement.

“The uptick in rates led to a decline in mortgage applications heading into Memorial Day weekend,” Kan said. “Both purchase and refinance applications fell, pushing overall activity to the lowest level since early March. Borrowers remain sensitive to small increases in rates, impacting the refinance market and keeping purchase applications below last year’s levels.”

The housing market has struggled amid a limited supply of homes available for sale while prices are at record highs. The median U.S. home sale price shot up 4 percent to nearly $388,000, real-estate platform Redfin pointed out last week, the highest its been since they started tracking the data. The median asking price also went up to $420,000, another all-time high. Elevated prices helped bring down pending home sales—when a seller has accepted a homebuyer’s offer but the deal has yet to conclude—4.2 percent, the biggest drop in three months.

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“There continues to be limited levels of existing homes for sale and many buyers are struggling to find listings in their price range that meet their needs,” MBA’s Kan noted.

As home prices hit record levels and housing supply is stifled, mortgage rates are higher.

FHA loans, where the government helps prospective buyers to get “better deals” from lenders, have also seen a rise in borrowing costs.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA shot up to 6.85 percent for the week ending May 24 from the previous week’s 6.77 percent, the MBA pointed out.

Update 5/29/24, 12:15 p.m. ET: This story has been updated with comments from NerdWallet’s Holden Lewis.

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