Many people who got pre-approvals in the last few months are now “highly motivated to get out and bid on homes,” says MBABC President, Joe Santos.
The reason? Santos says people are worried about losing their ultra-low pre-approved interest rates, and/or missing out on the dip in real estate prices. (Five to six weeks ago lenders were offering 5-year pre-approvals at 3.79%. Today, rates average in the 4.35% range.)
As a result, thousands of pre-approvals have been converting into live deals before they expire. This, in turn, has led to underwriting delays at several lenders.
The MBABC says the volume increase has been “quite dramatic” and–while not declaring an end to the real estate recession–it said: “it is clear (the downturn) may be much shorter than thought 6 months ago.”
Last modified: April 26, 2017
Bad news for lenders because they use historical conversion rates to hedge their pre-app pipelines. If an unusually high number of pre-apps convert, banks will lose money.
I expect that this will lead banks to an examination of the practice of offering pre-apps as well as to higher pricing for those who come after those ‘lucky few’ commitment holders. After all, the banks will get their money one way or another.
What a weird conclusion for the MBABC to make. They state themselves that the increase of volume is due to buyers unwilling to lose on the affordable rates they were pre-approved for. Wouldn’t that mean that this would just be a temporary bounce, and volumes would go back down once those pre-approvals cleared? What bearing does that have on the downturn?