"This year and this market have been anything but normal"
The purchase market was in a stalemate in July as high rates and home prices continued to dampen mortgage demand, Black Knight said in its latest Originations Market Monitor report.
Overall rate lock activity fell for the second straight month, down 7% in July. Purchase locks, which dominated the origination pipeline (88%), declined 7.4% from June and 27% from a year ago.
Adjustable-rate mortgages (ARMs) fell to 6.79% of July’s rate lock activity as rates for such products became less competitive against fixed products.
According to Andy Walden, vice president of enterprise research and strategy at Black Knight, current housing market dynamics are not conducive to boosting homebuyer origination volumes.
“While they moved around a bit in July, there was no escaping the fact that conforming 30-year rates topped 7% in July for the first time since they spiked last fall,” Walden said. “On both a practical and psychological level, that put further downward pressure on mortgage demand.”
There were also signs of credit tightening in July, such as rising down payments, falling loan-to-value ratios, and higher credit scores. The average credit score among primary residence purchase locks reached a record high of 730 in the first week of July before edging modestly lower to remain flat in July.
“With home prices hitting new peaks across many parts of the country and no end in sight to the for-sale inventory shortage, the housing market continues to reheat,” Walden said. “It’s worth noting, however, that – in a ‘normal’ year – June typically marks the calendar peak of home prices on a non-adjusted basis, so you would normally expect to see a decreasing trend through year’s end and into February. That said, this year, and this market, have been anything but normal. Rising rates may be tamping demand for homes at such record-high prices, as evidenced by rate lock activity, but they’ve still yet to overcome an even greater deficit of supply. As a result, the purchase market is in a stalemate.”
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