Average Mortgage Payment Continues Decline

CoreLogic reported that the typical mortgage payment across the nation fell annually in February—the 10th consecutive months of year-over-year declines. 

Despite the median-sales prices in the U.S. rising 4% in February to $223,502, the typical mortgage payment fell 6.8% because of a 21% decline in mortgage rates. The average rates for a fixed-rate mortgage fell from 4.37% in February 2019 to 3.47% in February 2020. 

In February 2019, the median sales price was up by 3.6% and the typical mortgage payment increased by 4.1% due to a 0.04 percentage point increase in annual mortgage rates. 

CoreLogic’s Home Price Index (HPI) forecasts that annual gains in sale prices each month from March 2020 through February 2021 will average 3.7%. However, the average mortgage rate is expected to fall by 2.8% during that same time frame. 

“The trend is driven by the expectation that, on average, the rate on a 30-year fixed-rate mortgage during the March 2020-through- February 2021 period will be about 0.5 percentage points lower than a year earlier,” the report said. 

Freddie Mac’s Primary Mortgage Market Survey found that the average 30-year fixed-rate mortgage was 3.28%. 

“Mortgage rates have stabilized at very low levels over the last few weeks as homebuyer demand slowly improves,” said Sam Khater, Freddie Mac’s Chief Economist. “Although purchase applications reached a new low in mid-April, today purchase demand is only down ten percent from one year ago. While demand is improving, inventory is low and declining with no signs of a turnaround yet.”

Despite these low rates, the Mortgage Bankers Association reported that mortgage applications for home purchase fell 12% year-over-year. Compared to March 2020, applications decreased by 25 percent. This change does not include any adjustment for typical seasonal patterns.

"New home purchase applications severely weakened in April, which coincided with the peak of the social distancing efforts and restrictions on non-essential activities to help slow the spread of COVID-19. During what's typically the prime home-buying season, activity fell 25% from March and decreased 12% from a year ago," said Joel Kan, MBA's AVP of Economic and Industry Forecasting. "MBA estimates that new home sales dropped to an annualized pace of 533,000 units—the slowest since December 2016. This decline was in line with data from our Weekly Applications Survey, which indicated a pullback in March and most of April."