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As interest rates remain stubbornly high, mortgage demand falls
Mortgage rates, stuck near a recent peak, spurred a 1.8% drop in application volume week-on-week due to increased home prices, says the Mortgage Bankers Association. The 30-year fixed-rate mortgage remained steady at 6.87%, which, along with rising costs, deterred potential buyers. As such, mortgage applications decreased by 3% weekly and were 23% less year-on-year. Lower-income buyers particularly struggled, resulting in a 10% decrease in FHA applications. Consequently, the average loan size swelled to $432,700, a peak since May. Refinancing was flat and 30% lower compared to last year. The Fed's possible 0.25% rate hike could impact future rates.
According to S&P Case-Shiller, home prices continue to rise, with'striking' regional variances
May witnessed a fourth consecutive month of rising home prices, according to S&P CoreLogic Case-Shiller's index, despite a sharp rise in mortgage rates. National prices rose 0.7% MoM, with 10-city and 20-city composites gaining 1.1% and 1% respectively. However, prices were down 0.5% YoY. Rust Belt cities outperformed others with Chicago, Cleveland, and New York seeing substantial gains. Despite a downward trend, prices are recovering due to low supply, with homeowners unwilling to sell. Yet, the housing market remains unaffordable for many due to low inventory.
As a result of a lack of supply, June home sales fell to their worst pace in 14 years
Pre-owned home sales fell 3.3% in June MoM, and 18.9% YoY, marking the slowest June sales rate since 2009, states the National Association of Realtors. The slump isn't due to a lack of demand but a severe shortage of supply with 1.08 million homes for sale at June's end, down 13.6% YoY. Despite falling sales, home prices remain high due to low supply. First-time buyers are struggling the most, with their share of sales falling to 26%, the lowest since records began. However, sales of newly built homes are rising, benefiting from the existing home market's sluggishness.
Mortgage refinance demand has increased slightly as interest rates have dropped from their recent highs
Following a sharp increase in July, mortgage rates eased, spurring refinance demand but leaving potential homebuyers unaffected. Mortgage application volume grew 1.1% last week, with the average interest rate for 30-year fixed-rate mortgages decreasing to 6.87% from 7.07%. Refinance applications surged 7% weekly but were still 32% lower YoY. However, applications to buy homes fell 1% weekly and 21% YoY due to decreasing supply and increasing prices. Mortgage rates remain in the high 6% range, with the market anticipating the Federal Reserve's next steps.
