Rates Rise Nominally, House Price Growth Slows
After dropping for three consecutive weeks, Mortgage rates increased 9 basis points last week according to the Freddie Mac Primary Mortgage Market Survey released May 30th. More hawkish commentary about inflation and tepid demand for longer-dated Treasury auctions caused market yields to rise across the board. This reality, as well as economic signals that have moved sideways over the last few weeks, have resulted in mortgage rates drifting higher as markets continue to dial back expectations of interest rate cuts.
Mortgage applications decreased 5.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 24, 2024. “Mortgage rates increased for the first time in four weeks. The uptick in rates led to a decline in mortgage applications heading into Memorial Day weekend,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. Borrowers remain sensitive to small increases in rates and there continues to be limited levels of existing homes for sale and many buyers are struggling to find listings in their price range that meet their needs.”
U.S. house price growth slowed sharply in March, likely as rising mortgage rates weighed on demand, data showed on Tuesday. Prices edged up 0.1% in March after surging by an unrevised 1.2% in February, the Federal Housing Finance Agency said in its monthly report on home prices. On a year-over-year basis, prices increased 6.7% in March after advancing 7.1% in February. But with housing inventory still well below pre-pandemic levels, house prices could remain elevated for a while. “U.S. house prices continued to grow at a steady pace in the first quarter,” said Anju Vajja, deputy Director for FHFA’s Division of Research and Statistics.
U.S. consumer confidence unexpectedly improved in May after deteriorating for three straight months amid optimism about the labor market, but worries about inflation persisted and many households expected higher interest rates over the next year. The mixed survey from the Conference Board on Tuesday also showed more consumers believed that the economy could slip into recession in the next 12 months. “Continued positive job growth, rising wages, an ebullient stock market and healthy household balance sheets will keep consumers spending despite elevated prices and borrowing costs,” said Oren Klachkin, financial market economist at Nationwide.
