Significant Decrease in Mortgage Rates on Weak Economic News
Mortgage rates decreased 26 basis points from last week, according to the Freddie Mac Primary Mortgage Market Survey released August 8th. This is their lowest level in over a year and is following the likely overreaction to a less than favorable employment report and financial market turbulence for an economy that remains on solid footing. The decline in mortgage rates does increase prospective homebuyers’ purchasing power and should begin to pique their interest in making a move. Additionally, this drop in rates is already providing some existing homeowners the opportunity to refinance, with the refinance share of market mortgage applications reaching nearly 42 percent, the highest since March 2022.
Mortgage applications increased 6.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 2, 2024. “Mortgage rates decreased across the board last week and mortgage application volume reached its highest level since January of this year. The 30-year fixed rate fell to its lowest level since May 2023, following doveish communication from the Federal Reserve and a weak jobs report, which added to increased concerns of an economy slowing more rapidly than expected,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As a result of lower rates, refinance applications increased across all loan types, particularly for VA loans, and were almost 60 percent higher than it was at this time last year and were at its highest level in two years.”
Initial claims for unemployment insurance totaled less than expected last week, countering other signs that the labor market is weakening. First-time filings for jobless benefits came to a seasonally adjusted 233,000 for the week, a decline of 17,000 from the previous week’s upwardly revised level and lower than the Dow Jones estimate for 240,000, the Labor Department said Thursday. While the top-line number helped allay some fears, the level of continuing claims, which run a week behind, edged up to 1.875 million, the highest since Nov. 27, 2021. Jobless claims have been trending higher for much of the year, though still remain relatively tame. The recent uptick has been attributed to disruptions from Hurricane Beryl as well as summer shutdowns at auto plants.
Job growth in the U.S. slowed much more than expected during July and the unemployment rate ticked higher, fueling fears of a broader economic slowdown, the Labor Department reported Friday, August 2nd. Nonfarm payrolls grew by just 114,000 for the month, down from the downwardly revised 179,000 in June and below the Dow Jones estimate for 185,000. The unemployment rate edged higher to 4.3%, its highest since October 2021. The labor market had been a pillar of economic strength but has recently shown some trouble signs, and the July payroll increase was well below the average of 215,000 over the past 12 months.
