Mortgage Application Costs Dip in May

Homebuyer affordability improved in May due to slightly lower mortgage rates and increased housing inventory, according to the Mortgage Bankers Association (MBA). The national median payment for purchase applicants dropped to $2,219, reducing costs by $37 month over month. The MBA’s Purchase Applications Payment Index (PAPI) fell 1.6%, indicating better affordability, with median earnings rising 4.6% compared to last year. For lower-payment mortgages, the median payment decreased to $1,508. The Builders’ Purchase Application Payment Index showed a drop in median mortgage payments for new homes, from $2,604 in April to $2,522 in May.

FHA loan applicants saw their median mortgage payment decrease to $1,924 in May, while conventional loan applicants’ median payment fell to $2,226. MBA forecasts mortgage rates to fall closer to 6.5% by year-end, improving affordability further. State-level differences showed Idaho, Nevada, and Arizona with the highest PAPI scores, indicating lower affordability, while Louisiana, Connecticut, and New York had the lowest, indicating better conditions. Affordability also improved across demographic groups, with national PAPI scores decreasing for Black, Hispanic, and White households.

Redfin: Typical Home Sells Below List Price

For the first time since 2020, the typical home sold during the four weeks ending June 23 went for less than the asking price, according to Redfin. Just under two-thirds of U.S. homes sold above asking price during this period, the lowest share for any June since 2020 and down from 36% a year ago. Nearly 7% of sellers dropped their asking prices, the highest since November 2022.

The report highlights that increased supply is outpacing demand, leading to more homes selling below the asking price. New listings are up over 8% year-over-year, and more than 60% of homes are on the market for at least a month without a contract. Additionally, record-breaking heat is also slowing the market, with some buyers discouraged by the weather. However, if inflation cools, mortgage rates may decrease, potentially giving buyers some relief.

NAR: Pending Home Sales Hit All-Time Low in May

Pending home sales declined in May, marking the second consecutive month of drops and reaching a record low, according to the National Association of Realtors (NAR). The Pending Home Sales Index (PHSI) fell 2.1% from April to 70.8 in May, down 6.6% year-over-year, the lowest since NAR began tracking in 2001. Experts attribute the drop to mortgage rate volatility, suggesting a negative outlook for sales activity. The decline was observed across all major regions, with the South experiencing the most significant yearly drop at 10.4%.

Despite potential Federal Reserve rate cuts, NAR forecasts mortgage rates to remain above 6% in 2024 and 2025. They predict the median sales price will hit a record high of $405,300 in 2024, up from $389,900 in 2023, with 4.26 million existing homes expected to be sold in 2024, up from 4.09 million in 2023. NAR chief economist Lawrence Yun anticipates that more inventory and lower demand will ease home price appreciation, leading to increased home buying when mortgage rates decline, with moderately lower rates, higher sales, and stabilizing prices expected in the latter half of 2024.