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PMMS 7/15/2021

The average 30-year fixed-rate mortgage fell two basis points from the week prior to 2.88%. According to Sam Khater, Freddie Mac’s chief economist, the decline provides modest relief to those who are looking to buy homes in a tough market, with scant inventory and mounting home price appreciation.

“The summer swoon in mortgage rates continues as the 30-year fixed-rate mortgage fell for the third consecutive week,” Khater said. “Since their peak at 3.18% in April, mortgage rates have declined by thirty basis points.”

Mortgage rates have been hovering around 3% for several months. Economists and investors are closely watching for any indication that the Federal Reserve may change its position on the tapering of mortgage-backed securities and bond purchases.

During testimony to the U.S. House of Representatives Financial Services Committee on Wednesday, Federal Reserve Chair Jerome Powell pushed back at Republican lawmakers’ concerns about volatility in the prices of some goods, including lumber. High inflation, Powell said, is limited to “a small group of goods and services directly tied to the reopening,” and the U.S. central bank’s bond-buying will continue until there is substantial progress on jobs.

Tapering the U.S. central bank’s $120 billion in monthly bond purchases is “still a ways off,” Powell said. “If we continue to make progress on our goals we’ll reduce those purchases,” he said. Powell is scheduled to testify in front of the U.S. Senate Banking Committee Thursday morning.

Since March 2020, the Fed’s asset purchases have been split between $80 billion of U.S. Treasury bonds and $40 billion of mortgage-backed securities each month, keeping the cost of long-term borrowing low.

MBA 7/14/2021

After several consecutive weeks of drops, mortgage applications jumped 16% for the week ending July 9, 2021. The prior week‘s report showed a 1.8% drop in applications to the lowest level since January 2020. The sudden increase in applications was driven “heavily” by increased refinancing as mortgage rates dipped again, said Joel Kan, MBA associate vice president of economic and industry forecasting.

“Treasury yields have trended lower over the past month as investors remained concerned about the COVID-19 variant and slowing economic growth,” Kan said. “There also may have been a delayed spillover of applications from the previous week, when rates also decreased but there was not much of response in terms of refinance applications.”

Those lower rates may be helping some home buyers close on their purchases, especially first-time homebuyers, Kan said.

“We continue to see ebbs and flows as housing demand remains strong, but for-sale inventory remains low,” he said. “The year-over-year comparisons were down significantly for both purchase and refinance applications.”

The sheer amount of bidding wars decreased from May to June, per a study released this week from Redfin, as more homes for sale have hit the market in the past month. Overall inventory is still low, of course, but a cooling of the market could lead to more would-be buyers and an increase in mortgage applications soon, experts said.

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