A home is offered for sale on March 22, 2024 in Chicago, Illinois.
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Mortgage rates didn’t move much last week, and for the second week in a row, neither did mortgage demand. Potential buyers are handcuffed by exorbitant costs and low supply, and current homeowners have little to no incentive to refinance at today’s high rates.
Total mortgage application volume last week was essentially flat, dropping 0.6% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) slipped to 6.91% from 6.93%, with points decreasing to 0.59 from 0.60 (including the origination fee) for loans with a 20% down payment.
Applications to refinance a home loan fell 2% for the week and were 5% lower than the same week one year ago. Rates have been hovering around 7% for the past few months, and close to 90% of current borrowers have mortgages with rates below 6%.
Applications for a mortgage to purchase a home fell 0.1% from one week earlier and were 13% lower than the year-earlier week. Purchase demand now is about half of what it was in March 2020, before the Federal Reserve dropped rates to zero, igniting a massive homebuying boom, which wiped out already low supply. With rates now double what they were back then, sellers are stuck in place, and buyers can afford far less.
“Elevated mortgage rates continued to weigh down on homebuying. Purchase applications were unchanged overall, although FHA purchases did pick up slightly over the week,” noted Joel Kan, an MBA economist.
Mortgage rates bounced higher to start this week, after new economic data on manufacturing came in higher than expected and noted higher prices.
“Prices are critical at the moment because inflation is keeping rates elevated,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “If inflation refuses to resume the downward trajectory that was in place through the end of 2023, rates won’t have a compelling reason to rally.”
Wednesday brings more data on growth in the services sector, and Friday the all-important monthly employment report is released. Both could create rate momentum in either direction.