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PMMS 6/3/2021

Fickle mortgage rates rose once again last week, this time four basis points to an average of 2.99%. However, despite fluctuating sub-3% mortgage rates, borrowers are still competing in a supply strained and overheated market.

“Home prices continue to accelerate while inventory remains low and new home construction cannot happen fast enough,” said Sam Khater, Freddie Mac’s chief economist. “There are many potential homebuyers who would like to take advantage of low mortgage rates, but competition is strong. For homeowners however, continued low rates make refinancing an option worth considering.”

While the COVID-19 crisis has kept mortgage rates lower and suppressed inventory, these two factors have also facilitated higher levels of price growth as COVID-19 happened amid a housing market sweet spot.

“We have an increase in the number of buyers and a total collapse of inventory driving home-price growth,” said Logan Mohtashami, lead analyst at HousingWire. “In the last expansion, the only thing that kept home-price growth from taking off was the higher mortgage rates of 4% to 5%. We are currently enjoying the lowest mortgage rates ever, so we don’t have that to dampen the market.”

MBA 6/2/2021

Mortgage applications dropped for the second straight week, this time down 4% for the week ending May 28, 2021. This week’s data was compared to mortgage applications from the week of Memorial Day in 2020.

“Tight housing inventory, obstacles to a faster rate of new construction, and rapidly rising home prices continue to hold back purchase activity,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The government purchase index declined to its lowest level in over a year and has now decreased year over year for five straight weeks. Purchase applications were down almost 2% from a year ago, but that was compared to the week of Memorial Day 2020.”

Kan added that refinance activity dropped for the second straight week, even as the 30-year fixed rate decreased slightly to 3.17%.

“Even though rates have been below 3.2% over the past month, they are still around 20 to 30 basis points higher than the record lows in late 2020,” he said..

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• Why your assets matter
• Mortgage Calculator
• Is Credit Karma accurate?
• FHA vs Conventional, which is better?

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