Topline
The U.S. housing market received a glimmer of good news, as mortgage rates dipped to a multiweek low and home buyer activity jumped to a multimonth high, signaling some hope for the tight market, though activity remains far more muted than it was during the recent housing boom.
Mortgage rates are more than twice as pricey as they were during the height of the pandemic.
Key Facts
The average 30-year fixed mortgage rate was 6.69% in the week ending Friday, according to a Mortgage Bankers Association survey released Wednesday morning.
That’s the lowest rate since the week ending October 18.
And the organization’s seasonally adjusted purchase index jumped 6% week-over-week, the fourth consecutive weekly increase for the metric tracking new mortgage application volume.
The purchase index registered its highest level since January.
Crucial Quote
“The recent strength in purchase activity continues,” Joel Kan, MBA’s vice president and deputy chief economist, explained in a statement. Kan added “lower rates and higher inventory levels” are “giving prospective buyers more options compared to earlier in the year.”
Contra
Lower mortgage rates and higher purchasing demand are good omens for the broader housing market, but it’s far from a rosy backdrop. The 6.69% mortgage rate is more than 0.5 percentage points higher than it was the week after the Federal Reserve took the much desired step of lowering its benchmark interest rate for the first time in 4.5 years. The MBA’s purchase index is less than half of what it was in January 2022 before the Fed began hiking rates.
Why Are Mortgage Rates Still High?
The housing market slowdown came as the record-low, sub 3% mortgage rates home buyers enjoyed during the early stages of the COVID-19 pandemic dried up. Though mortgage rates are correlated with the Fed-determined interest rates, they move more closely with yields for 10-year Treasury notes, U.S. government bonds with a decade term, which are a proxy for the market’s longer run expectations for the Fed. The 10-year Treasury is actually up more than 0.5 percentage points from where it stood in September after the Fed’s initial rate cut, an adjustment which came as investors braced for a slower pace of rate cuts moving forward with renewed inflation agita. So with home prices still near record highs, prospective buyers have been forced to grapple with significantly higher interest payments with a still high principal, meaning much higher monthly payments than their peers who locked in low rates earlier this decade.
