Mortgage rates are affected by real-time world events So it makes sense that the first week of the war in Ukraine, ending March 4, 2022, would’ve caused a jump of 8.5 percent in mortgage applications in response to lower rates, according to the Mortgage Bankers Association (MBA).
The Relationship Between GDP, Unemployment Rates and Real Estate
One of the driving forces behind a thriving real estate market is the growth or slippage of the Gross Domestic Product (GDP). Although GDP is slowing in 2022 from a very healthy 7.0 percent in the last quarter of 2021, it still remains strong. The Conference Board forecasts annual growth in 2022 to be near 3.0 percent (year-over-year).
It’s safe to generalize that economic prosperity generally has a positive effect on homeownership because it often reflects growing corporate profits, potentially rising wages, job security and low unemployment. A rising tide lifts all boats, as they say.
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The unemployment rate is low also, with continuing shortages of workers (the rate includes only those workers who are actively looking for work, not those who are sitting on the sidelines, for whatever reason). While unemployment and GDP are factors that may not have a direct and discernible correlation to Americans being able to afford their mortgages, they do point to overall economic prosperity.
Fewer Defaults and Fewer Covid-19 Cases Also Positive Signs For Economy
In addition, the high foreclosure rates we saw during the pandemic should continue their downward trajectory. Mortgage delinquency rates have been easing down as the economy continues to rebound from the pandemic and are close to pre-pandemic levels.
While it’s possible that a new variant may emerge, that uncertainty is tempered by the fact that case rates have declined steadily since the vaccine was introduced and mask mandates are being ended in nearly every state in the U.S.
While it is impossible to make definite assurances about the future of the economy, especially during a sudden invasion of a sovereign country by a major world power, the economic factors explained above are positive indicators for people thinking about purchasing a home or refinancing.
Unfortunately, it appears that the war may be prolonged and cause great suffering, damage and loss of life. In such times of global conflict, it’s typical for people to make changes to their finances and their living situations.
For more details about the spike in mortgage applications, click here.
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