Mortgage Rates Increase Despite Signs of a Cooling Economy
Heading into the long holiday weekend, mortgage rates increased nine basis points after having fallen for seven of the last nine weeks, according to the Freddie Mac Primary Mortgage Market Survey released July 3rd. However, they have remained below seven percent. Both new home and pending home sales are down, causing active listings to rise. Freddie Mac is still expecting rates to moderately decrease in the second half of the year and given additional inventory, price growth should temper, boding well for interested homebuyers.
Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending June 28, 2024. “Mortgage rates moved higher last week even as the latest inflation data has kept market expectations alive for a rate cut from the Fed later this year,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Purchase applications decreased the final full week of June, even as both new and existing inventories have increased over the past few months. Refinance activity also remains subdued, although there was a slight increase in applications for conventional refinance loans.”
The number of Americans who applied for unemployment benefits last week rose slightly and stayed near a one-year high, largely because of big increases in New York, New Jersey, and California. New jobless claims have surged since the end of the school year, raising questions about whether it’s a temporary increase or a sign of rising layoffs. New claims rose by 4,000 from 234,000 in the prior week, the government said Wednesday. The number of people already collecting unemployment benefits in the U.S., meanwhile, rose by 26,000 to 1.86 million, the government said. That’s the highest level since late 2021. The gradually increasing level of these so-called continuing claims suggests it’s taking longer for people who lose jobs to find new ones. It’s still too soon to tell if the recent rise in jobless claims represents weaker hiring, an increase in layoffs, or seasonal changes in employment tied to the beginning of summer. Economists say it may take a month or two to determine if a new trend is emerging.
The U.S. is back on a “disinflationary path,” Federal Reserve Chair Jerome Powell said on Tuesday, but policymakers need more data before cutting interest rates to verify that recent weaker inflation readings provide an accurate picture of the economy. Data for May showed the Fed’s preferred measure of inflation did not increase at all that month, while the 12-month rate of price increases has ebbed to 2.6%, still above the U.S. central bank’s 2% target but on the way down after a scare in the first months of the year. “We just want to understand that the levels that we’re seeing are a true reading on what is actually happening with underlying inflation,” Powell said at a monetary policy conference. “I think the last reading and the one before it to a lesser extent suggest that we are getting back on the disinflationary path. We want to be more confident that inflation is moving sustainably down toward 2% before we start loosening policy.”
