Market Update May 27th, 2024

Last week, mortgage interest rates experienced a decline for the third consecutive week, which led to a surge in refinancing activity. Despite this decrease, the response from homebuyers remained tepid. According to data from the Mortgage Bankers Association’s seasonally adjusted index, the total mortgage application volume saw a modest increase of 1.9% compared to the previous week. This uptick was primarily fueled by those seeking to refinance rather than purchase homes, with the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances up to $766,550 dropping to 7.01% from 7.08%.

The detailed statistics revealed that applications to refinance a home loan increased by 7% over the week and were 21% higher than the same week a year prior. Despite these gains, the overall demand for refinancing remains significantly subdued compared to historical averages. This is largely because most current borrowers still benefit from much lower rates obtained in previous years. The gap between current rates and those from a year ago has been closing, evidenced by last week's rates being only 32 basis points higher than those of the previous year.

On the other hand, the market for new home purchases did not exhibit the same level of activity. Applications for mortgages intended for buying homes decreased by 1% for the week and were 11% lower than the same period last year. Factors such as high mortgage rates have impacted affordability, exacerbating challenges like low housing supply and intense competition, which continue to fuel bidding wars among prospective buyers.

As the week progressed, mortgage rates remained relatively stable, with little expectation of significant changes following the release of the Federal Reserve's meeting minutes. Given the current environment, where Federal Reserve members frequently communicate their views, it is unlikely that the upcoming minutes will significantly sway the mortgage rates. Historically, such releases have caused notable fluctuations, but the present market conditions suggest a more stabilized outlook.

As summer kicks off for families as school lets out, it will be interesting to see the next two months how buyer activity changes if at all. A lot of buyers who have been waiting on the sideline last year or two are starting to come to realize rates might not be changing much if at all. As well as sellers realizing with limited inventory buyers have their backs against a wall unless they choose to keep renting.

“Ask not what your country can do for you — ask what you can do for your country.”
— John F. Kennedy

Have a great week everyone!