LOCALIZE IT: Mortgage rates up, applications down across US

EDITORS/NEWS DIRECTORS:

Rising mortgage rates across the U.S. have combined with already high home prices to discourage would-be buyers.

Mortgage applications have declined sharply. Sales of previously occupied homes have fallen for five straight months, during what is generally the busiest time of year in real estate.

The rate increase is leaving buyers with some unwelcome options: Pay hundreds of dollars more for a mortgage, buy a smaller home, choose to live in a less desirable neighborhood or drop out of the market, at least until rates come down.

Here are some resources for finding data from your area and ideas for localizing the story. Read AP's national coverage here.

PINPOINTING THE NUMBERS

A trove of state and local housing market information is available from real estate services and associations. Here are some places to find key stats:

— Home sales: The National Association of Realtors does a monthly report on existing home sales, that is broken down by region (Northeast, South, Midwest and West) in their press release, but the trade organization will also provide state-by-state data upon request.

The popular real estate services Zillow and Redfin can also provide localized data on any major metropolitan market upon request. Each state, and many localities, have a chapter of the National Association of Realtors that can also provide you state or local data on home sales.

— Homes prices: The most common metric to track home prices is the S&P/Case-Shiller Home Price Index, which tracks home prices nationally but also in a 20-city composite index which is available for reporters monthly: https://www.spglobal.com/spdji/en/index-family/indicators/sp-corelogic-case-shiller/#overview

— Mortgage applications: The Mortgage Bankers Association's weekly mortgage application survey gives a national picture on mortgage activity, but the trade association will provide state data upon request. The national activity can be downloaded and tracked by the Mortgage Bankers Association's website: https://www.mba.org/news-and-research/newsroom/news/2022/07/20/mortgage-applications-decrease-in-latest-mba-weekly-survey

— Payments vs. size: As interest rates have jumped, the size of a home that would-be homebuyers can afford has shrunk in many locations. Data provided to The Associated Press by the real estate data company Redfin shows how much home a buyer could get with a $2,000 a month mortgage payment. In Providence, Rhode Island, for example an average buyer a year ago could purchase a roughly 4,900-square-foot home for that size mortgage payment. Now that amount only gets a buyer a 2,200-square-foot home.

Find similar figures for the country’s nearly 50 largest markets here: https://s3.documentcloud.org/documents/22112113/affordable-sqft-ap.pdf

— Health of buyers, borrowers: Fannie Mae does a monthly snapshot on the average mortgage processed through their system, which gives national data on the average mortgage amount, a borrower's credit score, loan-to-value ratio and debt-to-income ratio. The last three can give journalists an understanding of whether borrowers can really afford the homes they are purchasing.

Private state-by-state data for similar information is also available through the financial data firm Black Knight, which does a monthly snapshot on how well a borrower is paying their mortgage and if they are overextended. This April snapshot gives data on dozens of metropolitan markets nationwide and is available to journalists upon request: https://www.blackknightinc.com/wp-content/uploads/2022/06/BKI_MM_Apr2022_Report.pdf?#page=10

LOCALIZING THE STORY

As the housing market goes through its first period of distress since the popping of the subprime mortgage bubble more than 15 years ago, here are some questions to ask:

— Are home prices going up because there's more demand, or are home prices going up because the supply of homes is dwindling? Or is it a combination of both? As potential sellers see fewer buyers in the market, they might choose to hold onto their homes instead of sell them, leaving the listings out there to be potentially overpriced.

— What's the average age of a listing in your area? If homes are on the market for longer periods of time, that means there's potentially less demand.

— What percentage of homes in your geography are new construction versus existing homes? Particularly for Sun Belt states and cities, a significant chunk of home sales in those markets is new construction, which may be a bigger driver of the housing market than existing home sales. New construction can often be more accurately tracked by your local property registration agency, like a secretary of states office or property office.

— If a realtor says the market is still hot in your area, ask that financial interests that realtor might have in giving you that answer. That realtor is likely in the business of selling homes, or representing buyers, so their perspective might be more bullish on the market than it truly is.

PUBLISHABLE CONTEXT

The Federal Reserve has aggressively raised short-term interest rates to fight inflation, which in turn helps push rates higher for credit cards, auto loans and mortgages.

The rate on a 30-year mortgage averaged around 5.54% this week, according to mortgage buyer Freddie Mac; a year ago it was close to 2.78%.

All signals point toward the Fed continuing to raise rates, promising little relief for potential buyers at least for the rest of the year.

Besides pushing would-be homeowners to reconsider their home search, rising rates are also forcing a growing number of buyers who struck a deal on a house to back out. About 60,000 home-purchase deals fell through in June, representing nearly 15% of all homes that went under contract last month, according to Redfin. That’s up from 12.7% in May and 11.2% a year ago.

For more than a decade, potential homebuyers were willing to put up with rising home prices because the cost of a mortgage was at historical lows. The average mortgage rate on a 30-year fixed-rate mortgage mostly stayed below 4.5% for most of the last decade, according to data from the Federal Reserve Bank of St. Louis.

The financial data firm Black Knight estimates that the rise in mortgage rates has increased a typical borrower’s monthly payment by 44% since the beginning of the year. Since the start of the pandemic, the average mortgage payment has doubled to more than $2,100.

EMBED THESE CHARTS

These digital graphics related to the story are available for your use:

— Mortgage rates: Rising mortgage rates have combined with already high home prices to discourage would-be buyers. Mortgage applications have declined sharply.

<iframe title="Mortgage rates escalate in 2022" aria-label="Interactive line chart" id="ap-chart-2DpeU" src="https://interactives.ap.org/embeds/2DpeU/7/" scrolling="no" width="100%" style="border:none" height="400"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}();</script>

— Less Home For Your Dollar: This chart compares the average amount of square footage a homebuyer with a $2,000 monthly budget could afford in April 2021 compared with April 2022.

<iframe title="Less home for your dollar" aria-label="Grouped Bars" id="ap-chart-xM60C" src="https://interactives.ap.org/embeds/xM60C/7/" scrolling="no" width="100%" style="border:none" height="768"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}();</script>

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Localize It is an occasional feature produced by The Associated Press for its customers’ use. Questions can be directed to Katie Oyan at koyan@ap.org.