Rates At Lowest Point Since Mid-February Amid Continuing Signs of Cooling Economy
Mortgage rates fell to their lowest level since mid-March, dropping 12 basis points from last week, according to the Freddie Mac Primary Mortgage Market Survey released July 18th. Mortgage rates are headed in the right direction and the economy remains resilient, two positive incremental signs for the housing market. However, homebuyers have yet to respond to lower rates, as purchase application demand is still roughly 5 percent below where it was in the Spring, when rates were approximately the same. This is not uncommon; sometimes as rates decline, demand weakens, and the apparent paradox is driven by buyers making sure rates don’t decline further before they decide to purchase.
Mortgage applications increased 3.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending July 12, 2024. “Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower. The 30-year fixed rate declined to the lowest rate since March 2024,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Application activity was up 4 percent, driven by a 15 percent jump in refinances to the highest level since August 2022. Even with last week’s rate decline, purchase applications continue to lag, down 14 percent compared to last year’s pace.”
Retail sales were flat in June, defying Wall Street’s prediction of a decline amid signs of slowing in the US economy. Economists had expected a 0.3% decline in spending, according to Bloomberg data. Meanwhile, retail sales in May were revised higher to an increase of 0.3%, from a prior reading of 0.1%, according to Census Bureau data. June sales, excluding auto and gas, increased by 0.8%, above consensus estimates for a 0.2% increase. “This report shows that the consumer is holding in there well and maybe is not spending at the heady pace that we saw in the second half of last year but is certainly not falling off a cliff,” Citi senior global economist Robert Sockin told Yahoo Finance.
U.S. single-family homebuilding fell to an eight-month low in June amid higher mortgage rates, suggesting the housing market was likely a drag on economic growth in the second quarter. The report from the Commerce Department on Wednesday also showed permits for future construction of single-family houses dropped to a one-year low last month, indicating that any anticipated rebound in activity, if the Federal Reserve cuts interest rates in September as expected, could be muted. “The reductions in interest rates that we expect later this year likely will be a mixed blessing for the residential construction sector overall, as we think the Fed will be responding to rising unemployment, which will curb the flow of new buyers,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
