Rates Fall, But Affordability Challenges and Limited Inventory Remain
Mortgage rates fell another 15 basis points last week according to the Freddie Mac Primary Mortgage Market Survey released September 12th. They have now fallen more than half a percent over the last six weeks and are at their lowest level since February 2023. Rates continue to soften due to incoming economic data that is more sedate. However, despite the improving mortgage rate environment, prospective buyers remain on the sidelines, as they negotiate a combination of high house prices and persistent supply shortages.
Mortgage applications increased 1.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending September 6, 2024. “Mortgage rates declined for the sixth consecutive week, with the 30-year fixed rate decreasing to the lowest rate since February 2023. Treasury yields have been responding to data showing a picture of cooling inflation, a slowing job market, and the anticipated first rate cut from the Federal Reserve later this month,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. Added Kan, “Purchase applications increased over the week and are edging closer to last year’s levels. Despite the drop in rates, affordability challenges and other factors such as limited inventory might still be hindering purchase decisions.”
Slightly more Americans filed for unemployment benefits last week, but layoffs remain at historically low levels despite two years of elevated interest rates. Jobless claims rose by 2,000 to 230,000 for the week of September 7th, the Labor Department reported Thursday. The four-week average of claims, which smooths out some of week-to-week volatility, ticked up by 500, to 230,750. The total number of Americans collecting jobless benefits rose by a modest 5,000, remaining at about 1.85 million for the week of August 31st. Weekly filings for unemployment benefits, considered a proxy for layoffs, remain low by historic standards, though they are up from earlier this year. During the first four months of 2024, claims averaged just 213,000 a week, but they started rising in May. They hit 250,000 in late July, adding to the evidence that high interest rates were finally cooling a red-hot U.S. job market.
Inflation in August declined to its lowest level since February 2021, according to a Labor Department report Wednesday that also showed a key measure higher than expected, setting the stage for an expected quarter percentage point rate cut from the Federal Reserve. The Consumer Price Index, increased 0.2% for the month. That put the 12-month inflation rate at 2.5%, down 0.4 percentage point from the July level, and at its lowest level in 3½ years. However, the core CPI, which excludes volatile food and energy prices, increased 0.3% for the month, and the 12-month core inflation rate held at 3.2%. The slight uptick in core CPI keeps the Fed on defense against inflation, likely negating the probability of a more aggressive interest rate when policymakers meet next Tuesday and Wednesday.
