Mortgage Refinance Demand Surges 94% as Rates Drop Again

Mortgage demand is increasingly focused on refinancing as interest rates declined for the fifth week in a row. Total mortgage application volume rose just 1.6% last week, with the average rate for 30-year fixed mortgages slightly decreasing to 6.43%. Although refinancing applications fell 0.3% for the week, they are up 94% from last year, driven by borrowers seeking to lower their monthly payments amid previously higher rates. The refinance share of applications reached its highest point since March 2022.

Applications for home purchase loans rose 3% for the week, though they remain 4% lower than a year ago due to high home prices. The slight increase in purchase applications was led by government loans, particularly FHA and VA loans, which cater to lower-income buyers. While the drop in interest rates hasn’t significantly boosted homebuying activity, the market is closely watching upcoming economic data to gauge further changes.

Pending Home Sales Fall 5.5% in July

Pending home sales dropped by 5.5% in July, marking a decline across all U.S. regions except for the Northeast, which saw a slight year-over-year increase. The National Association of Realtors (NAR) reported that the Pending Home Sales Index (PHSI), a key indicator based on contract signings, fell to 70.2, the lowest level since its inception in 2001. Year-over-year, pending transactions decreased by 8.5%, reflecting ongoing challenges in the housing market despite job growth and higher inventory.

Regionally, the Northeast experienced a 1.4% monthly decline but grew 2.4% from last year. The Midwest saw the most significant drop at 7.8%, with an 11.4% year-over-year decrease. The South fell 6.5%, and the West saw a 3.8% decline in July. NAR Chief Economist Lawrence Yun attributed the downturn to affordability issues and uncertainty surrounding the upcoming presidential election, though falling mortgage rates may encourage future buyers.

Existing-Home Sales Rose 1.3% in July, Ending Four-Month Decline

Existing-home sales rose 1.3% in July, breaking a four-month decline, according to the National Association of REALTORS®. Sales increased in three of four major U.S. regions, while the Midwest remained steady. Year-over-year, sales fell 2.5%, with declines in the Midwest and South but gains in the Northeast and West. The total annual rate of sales reached 3.95 million, down from 4.05 million in July 2023.

Housing inventory in July increased slightly by 0.8% from June and 19.8% year-over-year, with 1.33 million units available. The median home price also rose 4.2% from last year, reaching $422,600, with all regions seeing price increases. Despite modest gains in sales, affordability is improving due to lower interest rates.