Mortgage Rates

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July mortgage interest rates forecast: down slightly

Mortgage rates are poised to edge lower in July as inflation cools.

We’re not talking about a steep rate decline. Picture a gentle slope, like the uneven floor of a 150-year-old house, where a dropped marble rolls, but slowly.

It appears that mortgage rates peaked for the year in May. We won’t know for sure until the end of December, but the trend has been downward. The 30-year fixed-rate mortgage averaged 7.22% in the first week of May, according to Freddie Mac’s weekly survey. It fell to 6.86% in the last week of June.

The gradual rate decrease was accompanied by declining inflation. From March through May, the core consumer price index fell from 3.8% to 3.4%. Mortgage rates tend to drop when the inflation rate falls. So if inflation continues to diminish, mortgage rates might keep falling.

Listening to the Fed

The Federal Reserve wants to push the inflation rate down to 2%. To that end, the central bank raised short-term interest rates by 5.25 percentage points in 2022 and 2023. The rate hikes delivered results, as inflation fell through 2023. But progress stalled in the first months of 2024, leading the Fed to postpone rate cuts.

The president of the Federal Reserve Bank of Atlanta, Raphael Bostic, said in late June that he finds “a few promising signals” in recent inflation data, and that prices are moving in the right direction.

“I have long maintained that the path to 2% would take considerable time; it just might take a little longer than one might have expected given how fast inflation was falling as we exited 2023,” Bostic wrote in a quarterly economic commentary. He added that he believes inflation might fall enough to warrant a rate cut in the final three months of 2024. But no promises.

Rate cuts might be nothing to celebrate

Even if mortgage rates fall, it doesn’t necessarily mean that homes will become affordable for everyone you know. The median home resale price hit an all-time high of $419,300 in May (the latest data available), according to the National Association of Realtors. Meanwhile, the average mortgage rate in May was around 7%.

After a 20% down payment (admittedly more than a typical first-time buyer can save), and at a mortgage rate of 7%, the principal-and-interest payment on a median-price home was $2,232. With costs that high, home sales dropped in May — down 2.8% from 12 months before.

As buying has slowed down, the inventory of existing homes for sale has been going up, according to Mike Simonsen, president of real estate analytics firm Altos Research. And that means prices could be softening, he said in his June 25 weekly market commentary on YouTube.

“Slightly more inventory, weaker demand, you’d expect price reductions to be climbing — and in fact, price reductions are, indeed, climbing,” he said, explaining that 36.9% of the homes currently on the market have cut their asking prices.

Home prices rise and fall seasonally, and they usually peak in June. If mortgage rates go down this autumn, as expected, the combination of lower home prices and interest rates could make homes a bit more affordable.

What other forecasters predict

Fannie Mae and the Mortgage Bankers Association predict that mortgage rates will fall in the quarter that begins in July. They both predict that the 30-year mortgage rate will average 6.8% from July through September, after averaging 7% from April through June in Freddie Mac’s survey.

What happened in June

The average 30-year mortgage rate averaged 6.82% in June, down from 7.01% in May, according to NerdWallet’s daily mortgage rate survey. Among factors affecting rates, the most influential was the May consumer price index, which came in below what the market expected.

Source: nerdwallet.com

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The Federal Reserve’s preferred measure of underlying U.S. inflation decelerated in May, bolstering the case for lower interest rates later this year.

The so-called core personal consumption expenditures price index, which strips out volatile food and energy items, increased 0.1% from the prior month. That marked the smallest advance in six months. On an unrounded basis, it was up just 0.08%, the least since November 2020.

From a year ago, it rose 2.6%, the least since early 2021, according to Bureau of Economic Analysis data out Friday. Inflation-adjusted consumer spending posted a solid advance after a pullback in April, driven by goods and fueled in part by a jump in incomes.

The report offers welcome news for Fed officials seeking to commence with rate cuts in the coming months, though policymakers will likely want to see additional reports like this one first. They recently dialed back their projections for rate cuts this year following worse-than-expected inflation data in the first quarter.

“The deflation in goods prices and weakness we are starting to see at least gets us a path to a possible September cut,” said KPMG Chief Economist Diane Swonk.

Central bankers pay close attention to services inflation excluding housing and energy, which tends to be more sticky. That metric increased 0.1% in May from the prior month, according to the BEA, the least since October.

Household demand has so far remained resilient even as borrowing costs have taken a toll on some sectors of the economy. The report showed inflation-adjusted outlays for services rose 0.1%, driven by airfares and health care. Spending on merchandise advanced 0.6%, led by computer software and vehicles.

Despite some signs of cooling in the labor market, solid wage growth continues to power consumer spending. Wages and salaries rose 0.7%. On an inflation-adjusted basis, real disposable income jumped 0.5%, the most since January 2023, after a flat reading in April.

The saving rate rose to 3.9%, the highest level since the start of the year.

A monthly government report on employment, due July 5, will offer the latest insight on how income growth is holding up.

Source: nationalmortgagenews.com

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The 30-year fixed rate loan continued to move downward, falling another 1 basis point this week, to its lowest level since the beginning of April, Freddie Mac said.

It averaged 6.86% as of June 27, compared with 6.87% one week prior but up from 6.71% for the same period one year ago, the Primary Mortgage Market Survey found. The last time this rate was lower was in the April 4 survey.

It diverged from the week-to-week movement in the 15-year FRM. The average for these loans rose to 6.16%, compared with last week when it was 6.13%. A year ago at this time, this product averaged 6.06%.

“The 30-year fixed-rate mortgage continues to trend down, hitting the lowest level in almost three months,” said Sam Khater, Freddie Mac’s chief economist, in a press release. “By historical standards, the economy is in good shape, and we expect rates to continue to come down over the summer months, bringing additional homebuyers back into the market.”

Rate movements as tracked by Freddie Mac reflected those of the 10-year Treasury yield at least for most of the past week.

While the 10-year Treasury remained in a narrow range for most of the past seven days, on June 26, it rose 8 basis points from its prior close to 4.32%, its highest close since June 11.

But in early morning trading on Thursday, it was back down to 4.29%.

That has yet to translate to mortgage pricing. Zillow’s rate tracker as of 11:45 a.m. was up 3 basis points from the previous day and 12 basis points from the previous week’s average to 6.66%.

Rates for the 30-year FRM from the Lender Price product and pricing engine posted on the National Mortgage News website at 10:20 a.m. on Thursday morning was back over 7%, to 7.021%, by 11:45 a.m. it was at 6.995%. But this was still nearly 14 basis points higher than the 6.86% it was at one week ago.

Even with rates rising, they have been relatively flat throughout June, and much lower than they were this past Spring, said Orphe Divounguy, senior economist at Zillow Home Loans.

“The recent economic data suggest economic growth will slow and inflation could return to the Fed’s 2% target sooner than previously anticipated,” Divounguy said in a Wednesday night statement. “Moderating consumer spending, falling home sales and rising home vacancy rates point to lower aggregate demand and easing price pressures in the months ahead.”

Pending home sales fell 2.1% month-to-month in May, a Thursday morning announcement said, but the outlook is somewhat better because of how rates moved in June, said Odeta Kushi, deputy chief economist at First American Financial.

“If mortgage rates continue their descent alongside rising inventory levels, some buyers may be enticed off the sidelines and boost the summer home-buying season,” Kushi said in a statement. “Nevertheless, a robust summer recovery is unlikely given ongoing affordability constraints.”

The Mortgage Bankers Association’s Weekly Application Survey released yesterday put the 30-year conforming FRM at 6.93%, down 1 basis point.

“Housing inventory is rising, albeit from very low levels, and mortgage rates are now below 7%,” said Bob Broeksmit, the MBA’s president and CEO, in a Thursday morning statement. “This is good news for prospective buyers — especially those with children — looking to move before the school year begins.”

The June 28 Personal Consumption Expenditures index release is the next milestone that could affect rate movements as investors use the data to adjust their inflation forecasts.

“Core inflation is expected to have moderated further over the past month,” Divounguy said. However, a higher-than-expected inflation print could undo progress and push rates higher.”

Source: nationalmortgagenews.com

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Federal Reserve Governor Lisa Cook said it will be appropriate to reduce interest rates “at some point,” adding that she expects inflation to improve gradually this year before more rapid progress in 2025. 

READ ALSO: Mortgage rates fall to lowest point in over a month

“With significant progress on inflation and the labor market cooling gradually, at some point it will be appropriate to reduce the level of policy restriction to maintain a healthy balance in the economy,” Cook said Tuesday in prepared remarks to the Economic Club of New York. 

“The timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks,” she said. 

U.S. central bankers left their benchmark rate unchanged at a more than two-decade high earlier this month, a level they’ve maintained for nearly a year. Policymakers say they need to see more data to be convinced that inflation is on a sustainable path toward their 2% target.

The Fed’s preferred underlying price gauge is expected to rise just 0.1% in May from a month earlier — marking the slowest advance of the year — in data out Friday. 

Cook expects three- and six-month inflation rates to continue to move lower on a “bumpy path,” with monthly data similar to the “favorable” readings seen in the second half of 2023 for the rest of the year. Annual inflation, however, will move roughly sideways, she said. 

“Beyond that, I see inflation slowing more sharply next year, with housing-services inflation declining to reflect the past slowing in rents on new leases, core goods inflation remaining slightly negative, and inflation in core services excluding housing easing over time,” Cook said.

The Fed governor said monetary policy is restrictive, as high interest rates put downward pressure on aggregate demand. 

While the economy remains resilient and the labor market strong, high mortgage rates have slowed home sales and construction, and delinquencies are rising as elevated prices and borrowing costs strain some Americans. 

Cook said the rising delinquency rates “are not yet concerning for the overall economy but bear watching.” 

The labor market is about where it was before the pandemic, she added, calling it “tight but not overheated.” She said data suggests payroll job gains were overstated last year and may continue to be this year. 

Speaking during a question-and-answer session following the speech, Cook said she and other policymakers are “attentive” to the risk that the labor market could “change very quickly,” and officials stand ready to respond. She demurred when asked about the potential for rate cuts this year, saying policymakers are data dependent.

Speaking earlier Tuesday, Governor Michelle Bowman said she sees a number of upside risks to the inflation outlook, and reiterated the need to keep borrowing costs elevated for some time. 

“We are still not yet at the point where it is appropriate to lower the policy rate,” Bowman said Tuesday in London. “Given the risks and uncertainties regarding my economic outlook, I will remain cautious in my approach to considering future changes in the stance of policy.”

Source: nationalmortgagenews.com

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Mortgage rates have leveled off in the past week, according to data on HousingWire‘s Mortgage Rates Center. The average 30-year rate for conforming loans sat at 7.08% on Tuesday, unchanged from one week ago, while the 15-year rate rose 1 basis point to 6.63% during the week.

There has been considerable downward movement in rates over the past few months after the 30-year rate peaked at 7.58% in early May. This has been sparked by a recent decline in the 10-year Treasury yield, a narrowing of the spread between the 30-year rate and the 10-year yield, and consistency from the Federal Reserve on the policy front.

HousingWire Lead Analyst Logan Mohtashami indicated that he does not expect much short-term movement in rates. He pointed to recent comments from Fed Governor Michelle Bowman, who does not anticipate any cuts this year to benchmark rates.

Bowman is not the only policymaker who shares this view. Last week, 11 of 19 Fed officials predicted one cut or fewer in 2024, a dramatic change from the 10 of 19 officials who anticipated three cuts in March.

Mohtashami noted that the new-home sales report to be released Wednesday, as well as the Personal Consumption Expenditures (PCE) inflation report that comes out Friday, could influence rates this week.

Last week, Mohtashami wrote that mortgage application data is signaling increased demand. Purchase loan applications, in particular, saw positive growth during consecutive weeks for the first time since mid-March. But applications remain down since the start of the year, Mohtashami noted.

“This suggests that we’re not experiencing real mortgage demand growth at high rates and the fluctuations we see in the data are merely rebounds from low levels,“ he wrote.

Mike Simonsen, president of Altos Research, wrote earlier this week that “higher for longer” mortgage rates have taken a toll on home sales. Altos reported that 67,000 new contracts for single-family home transactions were started during the past week, down 2.7% from the prior week and 3.3% than the same time last year.

“The takeaway from the pending sales data is that any growth in sales volume we might have seen early in the year is gone,“ Simonsen wrote. “This is a function of mortgage rates staying in the 7s. There’s just no incentive for buyers to jump now. Unless and until mortgage rates drop, we’re in this holding pattern.“

But Altos data also shows that a large share of homes (36.9%) include cuts to the original list price, a sign that inventory is rising and sellers are having a more difficult time locating a buyer. Simonsen noted that markets on Florida’s Gulf Coast, as well as pandemic-era boomtowns in the West such as Austin, Phoenix and Denver, have seen price cuts become more common of late.

“You have elements like property taxes and insurance costs that are way up, so you have a lot more sellers,“ Simonsen wrote.

Source: housingwire.com

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Purchase application data

When mortgage rates fell more than 1% lower in late 2022 and 2023, we saw a sustained bounce higher in purchase application data, which eventually lead to a higher monthly sales print. Then rates moved higher, pushing demand back near the lows of this economic cycle. I wrote about that and the most recent existing home sales report here.

As mortgage rates trend lower again and some of the labor data is at risk for more downside, it’s time to keep a close eye on how much demand lower rates will generate if they fall more over the next 6-12 months. For now, we just had back-to-back weeks of positive growth, with mortgage rates still around 7%.

Since the onset of falling mortgage rates in November 2023, we’ve seen 14 positive prints, 13 negative prints and two flat prints in the week-to-week data. However, as mortgage rates began to rise earlier this year, we observed a decline in demand. The year-to-date data for 2024 is unfavorable, with 8 positive prints, 13 negative prints and two flat prints. This suggests that we’re not experiencing real mortgage demand growth at high rates and the fluctuations we see in the data are merely rebounds from low levels.

10-year yield and mortgage rates 

Considering the softness in the economic data last week, with retail sales and housing starts at COVID-19 recession levels, which I wrote about here, the 10-year yield held up well. This means that it will take more weakness in the economic data for the 10-year yield to break under 4.20% and head lower. Mortgage rates didn’t move too much either way. The 10-year yield closed on Friday at 4.26%.

Mortgage spreads

The spread between the 30-year mortgage rate and the 10-year yield has been an issue since 2022 and things got worse after the March 2023 banking crisis. However, this year, spreads have improved.

If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be 0.47% higher. While we are far from being average with the spreads, the fact that we have seen this improvement is a plus this year.

Weekly housing inventory data

Inventory hit another one of my target levels this week, making it four times this year! My rule of thumb has been that inventory should have some weekly positive prints between 11,000 and 17,000 as long as rates are above 7.25%. Last week we saw positive inventory growth of 13,593!

  • Weekly inventory change (June 14 -June 21): Inventory rose from 620,539 to 634,132
  • The same week last year (June 16 June 23), Inventory rose from 451,808 to 460,668
  • The all-time inventory bottom was in 2022 at 240,497
  • This week is the inventory peak for 2024 at 634,132
  • For some context, active listings for this week in 2015 were 1,180,937

New listings data

Another positive story for 2024 has been the growth in new listing data, as most sellers are buyers. While we aren’t back to the usual trend we had between 2013 and 2019, the fact that we had growth is a plus. Now, context is critical; 2023 new listings data was at the lowest levels ever and 2024 looks to be second in the book. However, I will take this small victory.

The only thing about 2024 is that the growth rate is a bit slower than I was anticipating and it doesn’t look like I am going to get the bare weekly minimum for a seasonal peak of 80,000 this year. Here are the new listings for last week over the last several years:

  • 2024  71,678
  • 2023: 62,374
  • 2022: 83,347

Price-cut percentage

In an average year, one-third of all homes take a price cut — this is just traditional housing activity. When mortgage rates increase, demand falls and the price-cut percentage grows. When rates drop and demand improves, the price-cut percentage can fall. This data line is seasonal, and we have seen consistent year-over-year price-cut percentage growth since the end of March. This is much different than what we saw in 2023L even when mortgage rates headed toward 8%, the price cut percentage data was negative year over year. Of course last year, we had less inventory. 

A few weeks ago, in the HousingWire Daily podcast I discussed that the price cut data will cool down in the second half of the year in. Here are the price-cut percentages for last week over the previous few years:

  • 2024: 37%
  • 2023: 32%
  • 2022: 29%

Pending sales

Below is our weekly pending contract data year-over-year to show real-time demand. With more sellers who are buyers, we have a tad more demand this year. This contract data will grow if mortgage rates head lower and stay lower. This is why it’s vital to follow the 10-year yield, mortgage purchase apps,and weekly pending contract data to get real-time clues on demand well ahead of the existing home sales reports. 

  • 2024: 396,153
  • 2023: 385,699
  • 2022: 449,777

The week ahead: Home prices, home sales and Fed speeches

This week, we have a few housing reports: New home sales, which is critical to the economic cycle; pending home sales; and two home-price index reports. We have a lot of Fed presidents speaking and it will be increasingly more interesting to see if we see any changes to their verbiage.

The labor market in America is no longer tight, even Fed Chair Powell finally admitted that some of the labor data are back to pre-COVIDC-19 levels. To me, this lays the groundwork so that some Fed members who don’t want to see a recession have the ability to sound more dovish if the labor data gets worse.

Source: housingwire.com

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The impact of the elevated Federal funds rate and morgage rates on our economy is stark. The 5-unit sector, in particular, entered a recession in September 2023 and those permits have been at COVID-19 recession lows for an extended period. However, in the last few months, single-family permits have also been falling. The key turning point in every economic cycle is when construction workers lose their jobs in enough numbers that it pushes jobless claims higher.

Let’s take a closer look at today’s housing starts report.

From Census: Building Permits: Privately‐owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,386,000. This is 3.8 percent below the revised April rate of 1,440,000 and is 9.5 percent below the May 2023 rate of 1,532,000.

We want to keep this very simple. We have a backlog of orders that need to be built out, so that has kept labor on five-unit housing going, as it takes 21 months to finish a 5-unit construction project. Once those projects are done, there will be far less residential work for these construction workers and they will need to look at alternatives, like government-funded projects such as semiconductor fabrication plants. This is why we keep an eye on permit data.

We all know that 5-unit permits have been at COVID-19 recession lows for some time now, but what is different now is that the single-family permits are falling too. We still have a backlog of single-family homes that need to be built and the purchase application data for those new homes is growing. However, once those homes get built, and if permits for new single-family houses continue to fall, that will be an issue for construction labor. Construction labor for single-family homes already took a hit after rates rose toward 7% in 2022.

From Census: Housing Starts: Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,277,000. This is 5.5 percent (±9.4 percent)* below the revised April estimate of 1,352,000 and is 19.3 percent (±10.0 percent) below the May 2023 rate of 1,583,000.

As we can see below, housing starts are at the lows that we saw in the COVID-19 recession. This is happening while permits for single-family homes have only recently started to trend down. As more and more homes get built, if we don’t grow permits soon, then that labor force pool that are building homes are at risk when their jobs are completed. Hopefully, mortgage rates will fall soon, increasing builders confidence and getting more deals in the pipeline. This is what happened last year.

Why is this so important?

Economic cycles have similar patterns: one is that the Fed raises rates too much and is too restrictive, which leads housing to go into recession first, meaning construction workers on the residential side of things go down first. In the past few months we have been creating jobs in this sector, but if this trend of falling continues, then the labor pool is at risk of a decline.

All in all, it is a disappointing trend report on housing starts data, but this has been in the works for some time. The other side of this equation is that if construction labor breaks, mortgage rates will fall and that will spur demand, so hopefully we can limit the future damage of production when that happens.

However, for now, we will keep a close eye on it. For those who hear the stories about higher rates being inflationary, this is what they’re talking about: that eventually, the restrictive policy will prevent the future production of housing. As I always say: “Supply is the best way to defeat inflation. Demand destruction is a short-term fix, supply wins in the long run.”

Source: housingwire.com

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Mortgage rates continued to inch toward the 7% mark following last week’s meeting of Federal Reserve policymakers and new inflation data that showed further cooling of consumer prices.

On Tuesday, HousingWire‘s Mortgage Rates Center showed that the average 30-year rate for conforming loans was 7.08%. That was down 11 basis points from the same time last week and exactly 50 basis points below this year’s peak rate that was recorded in early May.

HousingWire Lead Analyst Logan Mohtashami recently noted that some specific economic signals are working in the favor of lower mortgage rates. These include a decline in the 10-year Treasury yield (which fell from 4.61% on May 29 to 4.24% on June 13) and a narrowing of the spread between the 30-year mortgage rate and the 10-year yield.

“If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be 0.52% higher,” Mohtashami wrote on Saturday. “While we are far from being average with the spreads, the fact that we have seen this improvement is a plus this year.”

Along with the lower costs of borrowing, prospective homebuyers are also being helped by more homes listed for sale. Data from Altos Research shows that for-sale inventory at the national level grew by 1.5% during the week ending June 14 and has reached its 2024 peak of more than 620,000 homes. For context, the inventory level in mid-June 2023 was less than 452,000.

“If mortgage rates keep falling and demand picks up, we will have a much better buffer with active inventory than in 2022 and 2023,” Mohtashami observed. “My rule of thumb has been that inventory should have some weekly prints between 11,000 – 17,000 as long as rates are above 7.25%. We have hit that three times this year; last year was a whopping zero.”

Last week, as expected, the Federal Open Market Committee left benchmark rates unchanged for a seventh straight meeting, holding them steady at a range of 5.25% to 5.5%. That came a day after the Consumer Price Index for May showed that annualized inflation fell to 3.3%, down from 3.4% growth in April. Fed officials have taken a hardline stance that inflation must move closer to their 2% target before short-term interest rates can be trimmed.

The U.S. employment report for May also influenced the Fed’s decision to leave rates unchanged. The national economy added 272,000 jobs last month, beating estimates of 180,000 and far outpacing the revised figure of 160,000 jobs added in April.

Melissa Cohn, a Florida-based regional vice president for William Raveis Mortgage, said in prepared remarks last week that the Fed’s “updated dot plot was more hawkish than we had hoped.“ She noted that in March, 10 of 19 officials indicated a total of three rate cuts this year. Last week, 11 of 19 predicted one cut or fewer.

“We are back to data-watching. There were no huge surprises in the Fed’s comments or dot plot,“ Cohn said. “Expecting one rate cut should be neutral for the markets, and the Fed’s future actions will depend on the markets. Let’s hope that we see the CPI report next month to show further progress on inflation — then we will have a good summer for mortgage rates and the real estate market.”

A Redfin report released last week noted that even as the U.S. median home price reached another record high of $394,000 during the four weeks ending June 9, declining mortgage rates are helping to alleviate monthly mortgage payment burdens. But Redfin also cautioned that if lower rates lead demand to outpace supply, affordability could take a hit.

”Lower rates and higher prices may ultimately cancel each other out when it comes to homebuyers’ monthly payments,” Chen Zhao, Redfin’s economic research lead, said in the report.

Source: housingwire.com

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10-year yield and mortgage rates 

After the intense jobs week data, we ran straight into CPI and PPI inflation week, with a Fed meeting thrown in! I got one good crumb from the Fed meeting that made me smile: Powell finally admitted that the labor market isn’t tight anymore, which is a beneficial statement for rates down the line if the labor data gets weaker. I discuss this in this episode of the HousingWire Daily podcast.

Last week had softer inflation data, but I am much more focus needs to be put on the weekly jobless claims data and jobs week data.

The 10-year yield closed last week at 4.22%.

Mortgage spreads

The spread between the 30-year mortgage rate and the 10-year yield has been an issue since 2022 and things got worse after the March 2023 banking crisis. However, this year, spreads have improved despite being far from ordinary.

If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be 0.52% higher. While we are far from being average with the spreads, the fact that we have seen this improvement is a plus this year.

Purchase application data

Last week, we had the second-best week-to-week purchase application data percentage print as mortgage rates have fallen recently. Now, I caution everyone that we are working from a shallow bar, so moving the needle doesn’t take much. However, you have something if we can string out a few weeks like this.  

Since November 2023, when mortgage rates started to fall, we have had 13 positive prints versus 13 negative prints and two flat prints week-to-week. Once mortgage rates began rising in 2024, some demand was removed. As shown below, the year-to-date data isn’t even positive for 2024: we’ve had seven positive prints, 13 negative prints, and two flat prints. We aren’t getting any real mortgage demand growth with rates this high and the bounces we see in the data are coming from depressed levels.

Weekly housing inventory data

As we head into the summer, I still can’t express enough gratitude for the growth in inventory this year. If mortgage rates keep falling and demand picks up, we will have a much better buffer with active inventory than in 2022 and 2023.

My rule of thumb has been that inventory should have some weekly prints between 11,000 -17,000 as long as rates are above 7.25%. We have hit that three times this year; last year was a whopping zero. Even though the weekly inventory growth rate didn’t hit that level, rates fell on Friday and inventory grew at a healthy clip of 8,943.

  • Weekly inventory change (June 7-June 14): Inventory rose from 611,596 to 620,539
  • The same week last year (June 9-June 16): Inventory rose from 443,749 to 451,808
  • The all-time inventory bottom was in 2022 at 240,194
  • This week is the inventory peak for 2024 at 620,539
  • For some context, active listings for this week in 2015 were 1,174 446

New listings data

Another positive story for 2024 has been that new listings data is growing from the record-low levels we saw in 2023. As most sellers are buyers, seeing more sellers listing their homes has been good. The only thing about 2024 was that I was 100% sure we would see a seasonal peak print at a minimum of 80,000 and it’s starting to look more and more like it won’t happen this year as the seasonal decline in new listings isn’t far away.

Here are the new listings for last week over the last several years:

  • 2024  71,457
  • 2023: 62,187
  • 2022: 87,996

Price-cut percentage

In an average year, one-third of all homes take a price cut — this is standard housing activity. When mortgage rates increase, demand falls and the price-cut percentage grows. When rates drop and demand improves, the price-cut percentage can fall. This data line is seasonal, and we have seen consistent year-over-year price-cut percentage growth since the end of March. 

As the old stale data trickles in, we should see a cooling down in year-over-year price growth. I recently discussed this in the HousingWire Daily podcast and explained why I believe this is the case. Here are the price-cut percentages for last week over the previous few years:

  • 2024: 36%
  • 2023: 31%
  • 2022: 27%

Pending sales

Below is our weekly pending contract data on a year-over-year basis to show demand in real time. With more sellers who are buyers, we have a tad more demand this year. If mortgage rates head lower and stay lower, this contract data will grow, but we don’t see that growth in mortgage demand yet. 

  • 2024: 395,960
  • 2023: 386,052
  • 2022: 452,003

Week ahead: Existing home sales, housing starts, retail sales and Fed speeches

This week, we will get some economic data; retail sales will be the essential data line for the Fed. We will also get housing starts and it will be interesting to see if we continue the down trend in single-family and multifamily permits. Existing home sales will be out on Friday and should still trend near recent lows. However, this week, the Fed speeches will engage with all the data we have gathered recently, so we’ll keep an eye on that.

Source: housingwire.com

Apache is functioning normally

Record-high home prices and elevated interest rates have weighed down mortgage markets. The Federal Reserve signaled its intention to maintain higher-for-longer rates, confirming that a reprieve is not on the horizon for borrowers and originators alike. Recent stagnation in refinancing loans, coupled with supply and demand discrepancies in housing, means originators still find themselves in an increasingly competitive landscape despite having expectations of the worst being over. These market developments underscore the reality we must face: Playing the interest rate waiting game is not a viable strategy. Instead, originators must aggressively seek out innovative ways to serve borrowers and generate business in this challenging market.

Meet your clients where they are

Because originators’ loan activity has decreased significantly, it’s imperative that you incorporate new products and services in order to grow your business and meet borrowers’ needs in the current market.

Housing sales have slowed due to waning supply and record-high prices.  However, a record $17 trillion of home equity is still available in the market. The bottom line: People are staying put. So how can you leverage this massive amount of equity? Explore HELOCs, which come in all shapes and sizes, meaning you can tailor them to your client base. For example, bank statement HELOCs serve self-employed borrowers, who might not qualify for traditional products. Bank statement HELOCs offer borrowers the flexibility to fund the endeavors that matter most to them, such as business ventures, home renovations, and other expenses.  

Furthermore, elevated interest rates have made it more difficult for borrowers to obtain personal loans. That’s where HELOCs come in: By offering bank statement HELOCs, originators can provide a valuable service that meets borrowers’ current needs while expanding originators’ own businesses through broadened product offerings.

In addition to HELOCs, flexible non-agency loans, such as non-QM loans, can help originators serve a greater range of borrowers. These loans are particularly beneficial for the growing number of self-employed borrowers who might not meet traditional criteria for mortgage qualification. 

By growing your experience with and expertise in niche products such as HELOCs and non-agency loans, you will hold a competitive advantage over your peers that stick to offering only conventional loan products.

Be proactive to stay ahead

Offering innovative products to your clients isn’t only for their benefit; it’s an investment in your own growth too. The time that originators spend becoming an expert in niche products enables them to offer tailored solutions to more diverse borrowers, expanding the potential reach of their practices and opening the door to long-term business growth. Keeping a finger on the pulse of borrower behaviors and motivations allows originators to anticipate their clients’ needs and stay ahead of market challenges. 

Continuous education on products is crucial for originators, and those that don’t make a proactive effort to increase and improve their knowledge are at a disadvantage when it comes to delivering on their clients’ needs and standing out among industry peers. Originators must seek out webinars, workshops, and training that enhance their understanding of new and developing product offerings, ongoing market trends, and industry best practices. Looking beyond their own education, originators must also be prepared to educate clients on the benefits of different loan products and how certain mortgage innovations could be applied to help them achieve their goals. Educated borrowers are likely to be confident in their financial choices, offer business referrals, and establish trusting relationships with their originators. 

By remaining flexible and innovative, originators can thrive even in a challenging interest rate environment. Remember to focus on delivering value to borrowers and to proactively seek out new opportunities. No matter what the market is like, you can turn industry innovation into a growth opportunity for your business.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

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Source: housingwire.com