Government-Supported Mortgages for Rural Home Buyers Rise, Overall Applications Dip: MBA Survey – May 24 Update

The share of government-supported mortgages aimed at helping home buyers in rural areas saw a slight increase for the week ending May 24, according to the latest survey from the Mortgage Bankers Association. While overall mortgage applications fell nearly 6 percent, 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.

The rise in USDA-guaranteed mortgages can be attributed to their appealing terms, including no down payment requirement and competitive interest rates. There is strong demand for housing in rural areas, and eligible borrowers are showing interest in these loans.

In contrast, other types of government-supported loans, such as FHA and VA loans, experienced declines. FHA loans dropped to 12.7 percent, while VA loans fell to 12 percent. The overall decrease in applications can be attributed to elevated mortgage rates, which surpassed 7 percent for the 30-year fixed rate.

Joel Kan, MBA’s deputy chief economist, stated that the increase in rates led to a decline in mortgage applications heading into Memorial Day weekend. Both purchase and refinance applications dropped, pushing overall activity to the lowest level since early March.

With limited housing supply and record-high prices, the housing market is facing challenges. Median home sale prices have reached nearly $388,000, and the median asking price is $420,000, both all-time highs. Pending home sales have also decreased by 4.2 percent, indicating a slowdown in the market.

As home prices continue to rise and housing supply remains constrained, mortgage rates are also climbing. The average contract interest rate for FHA-backed mortgages increased to 6.85 percent.

Overall, the housing market is navigating through challenging conditions, impacting both buyers and sellers. Stay tuned for further updates on this evolving situation.