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Mortgage rates are down half a percentage point from 2024 highs, but applications for purchase loans dropped last week for the second week in a row as rising home prices continue to shut many would-be homebuyers out of the market.
A weekly survey of lenders by the Mortgage Bankers Association (MBA) showed requests for purchase loans fell by a seasonally adjusted 4 percent last week when compared to the week before, and were down 15 percent from a year ago.
Joel Kan
“Mortgage rates continued to ease, with the 30-year fixed rate dipping to 6.82 percent, the lowest level since February 2024,” said MBA Chief Economist Joel Kan, in a statement. “Purchase applications decreased as ongoing affordability challenges persist with rates at their current levels and with home-price appreciation still strong in many markets.”
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Applications to refinance existing mortgages were essentially unchanged from week to week but up 38 percent from a year ago. Refi applications accounted for 39.7 percent of all mortgage requests.
Mortgage rates continue to ease
Rates for 30-year fixed-rate conforming mortgages averaged 6.77 percent Tuesday, down half a percentage point from a 2024 high of 7.27 percent registered on April 25, according to rate lock data tracked by Optimal Blue.
Rates remain stubbornly above 7 percent for borrowers seeking jumbo mortgages that exceed Fannie Mae and Freddie Mac’s $766,550 conforming loan limit, thanks in part to the growing “spread” between jumbo and conforming loans.
Home prices have shown surprising resilience as mortgage rates climbed from below 3 percent in early 2021 to above 7 percent last year.
The National Association of Realtors reported Tuesday that the median sales price for existing homes was up 4.1 percent in June from a year ago to an all-time high of $462,900. Sales also slipped 5.4 percent to a seasonally adjusted annual rate of 3.89 million.
Oliver Allen
“A sharp fall in June sales always looked likely given the further decline in pending home sales in May — they lead existing sales by about a month — and rock-bottom levels of mortgage demand,” Pantheon Macroeconomics’ Senior U.S. Economist Oliver Allen said in a note to clients.
The 1.32 million homes on the market at the end of June represented 4.1 months’ supply at the current monthly sales pace, NAR said, up from 3.1 months a year ago.
“But that improvement mostly reflects lower sales — this year was the weakest June since 1995 — rather than many more homes coming onto the market,” Allen said.
Economists at Fannie Mae and the Mortgage Bankers Association predict national home price appreciation will cool by half to around 3 percent by the final quarter of 2025, which implies that home prices will come down in some markets where supply exceeds demand.
Realtor.com data shows active for-sale listings were up 37 percent in June from a year ago, but the pace of sales remains subdued as the housing market continues to wait for affordability to improve, Fannie Mae Chief Economist Doug Duncan said Tuesday.
For would-be homebuyers in Sunbelt markets, relief could come in the form of lower prices if listings continue to come on the market faster than buyers snatch them up.
Zillow data shows that although home prices continued to appreciate in 46 of the 50 largest metro areas in June, home values were down from a year ago in four Sunbelt metros: New Orleans (-6 percent); Austin, Texas (-4.6 percent); San Antonio, Texas (-2.7 percent); and Birmingham, Alabama (-0.6 percent).
Homebuyers in many parts of the Northeast and Midwest, where inventory remains tight, might need to see mortgage rates come down some more before they’re ready to get off the fence, forecasters say.
Mortgage rates projected to ease
Source: Fannie Mae and Mortgage Bankers Association forecasts, July 2024.
Fannie Mae economists project rates on 30-year fixed-rate mortgages will decline to an average of 6.7 percent during Q4 2024 and to 6.2 percent by Q4 2025. The MBA envisions rates coming down a little faster, to an average of 6.6 percent in Q4 2024 and 6.0 percent during Q4 2025.
Fannie Mae economists expect the Federal Reserve to cut rates in September and December, following two consecutive lower-than-expected prints of the Consumer Price Index and signs that job growth is slowing.
Because the Federal Reserve typically telegraphs its moves in advance, futures markets tracked by the CME FedWatch Tool on Wednesday predicted only a 7 percent chance that central bank policymakers will cut rates at their next meeting, which wraps up on July 31.
But futures markets investors have priced in a 100 percent chance that the Fed will bring short-term rates down by at least 25 basis points on Sept. 18, and an 8 percent chance of a 50 basis-point cut. A basis point is one-hundredth of a percentage point.
Futures markets tracked by the CME FedWatch Tool on Wednesday were predicting the odds of at least three rate cuts totaling 75 basis points by the end of the year at 59 percent, up from 23 percent on June 24.
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