Applications have now risen for three consecutive weeks
The US housing market may have struggled to gather pace in the first half of 2024 – but climbing mortgage applications have presented a glimmer of optimism in recent weeks.
The Mortgage Bankers Association (MBA) revealed on Wednesday that the week ending June 21 saw applications tick upwards by 0.8%, increasing for the third consecutive time as a slight dip in mortgage rates helped more borrowers step off the sidelines and push ahead with their homebuying plans.
The average 30-year fixed rate recently fell to 6.93%, marking its lowest level for more than three months, helping spur a small increase in purchase applications – although refinance activity remains sluggish, the MBA said, as homeowners persist with their current favorable mortgage rates.
While the late spring and summer markets often experience something of a lull in activity for various reasons, recent weeks have seen a solid purchase market emerge, according to Scott Valins (pictured top), chief executive officer and founder at GoRascal.
That’s been caused in part by a higher percentage of contracts and accepted offers thanks to inventory opening up in recent times. “It’s been steadily busy since the spring, now into the summer,” Valins told Mortgage Professional America. “Historically for us, July has been a slow month. I attribute it less to the lack of volume and demand, and more towards fewer people around to advance a file forward.
“[There’s] a lot more vacations. Kids are out of school, and maybe also as we get a bit closer to August, it’s harder to cram a closing in before school starts… that’s what feels like the end of the spring push, then maybe a little bit of a lull in the middle, end of summer and then usually fall picks right back up. But it’s been nice to see a small dip in interest rates over the last three weeks… I think that’s spurred an additional pop in applications and interest from consumers.”
US home prices slow after nearly 10 months of gains, says S&P CoreLogic Case-Shiller Index. CoreLogic’s Selma Hepp and S&P’s Brian Luke note pressure from high mortgage rates and seasonal trends. https://t.co/O6rt0ZzxmV#HousingMarket #RealEstate #HomePrices
— Mortgage Professional America Magazine (@MPAMagazineUS) June 27, 2024
Borrowers encouraged by downward trend in mortgage rates
While mortgage rates remained stubbornly above the 7% mark for a prolonged period, the recent dip – however small – could have proven an important psychological boost for borrowers pondering the right time to enter the market, according to Valins.
Rates had been on an unpredictable path in previous years, plunging at the onset of the COVID-19 pandemic before beginning a gradual uptick at the end of 2021 and in early 2022. November of last year saw the 30-year rate hit its highest peak for over 23 years – but the initial shock of those spikes for consumers appears to have worn off, helped by the decrease of recent weeks.
For Valins, many borrowers have been buoyed by that slide in rates below 7%. “The story I like to tell customers is when rates when from 3% to 5% to 7% [and] at some point we almost got back into the fives, it was like, ‘Hallelujah. Everybody wants to buy a house,’” he said.
“And so now, some of these micro-moves of a little bit above 7% back firmly into the high sixes, I think, is a psychological move that makes the consumer say, ‘OK – let’s go. This might be the best I can get for a while from it.’”
Where do refinancing opportunities lie?
On the refinance side, activity fell slightly on a week-over-week basis, dropping to 35.1% of total applications compared with 35.2% the week prior, with little impetus for homeowners to ditch a low current rate and move into a new arrangement at a higher borrowing cost.
Still, there are plenty of opportunities on the refi side at present – particularly for those buyers who purchased their home in the fall, when rates were significantly higher than their current level.
While spring may have been too soon to talk to that borrower cohort about a refi, now could be the perfect time for a rejig, according to Valins. “Earlier in the year, rates were a bit lower, and had we not just been a few months removed from the very high rates, there could have been some good refinance volume,” he said.
“You [can] refinance your customer three months after closing… but there are penalties, and most consumers just don’t want to be bothered three months after buying a home. Now we’re finally six-plus months removed from those fall highs. And so I do think it’s creating, by no means a refinance boom, but opportunities to connect with customers and drop their rates.”
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