With mortgage rates climbing to a 3-month high, housing demand has dropped in the past few weeks. The number of mortgage applications reached its lowest point since July, according to a recent report from the California Association of Realtors.
Home sales, said the report,”will likely remain soft in October and November, until rates start coming down again.”
At the same time, however, new home sales in September reached the highest level since May 2023, with new housing markets benefiting from low rates.
As rates have risen to 7% recently, the report noted, the new housing market sales momentum will likely slow in the near future. Consumer short-term inflation expectations in September, however, continued at their lowest level since early 2021, possibly bringing rates down in the coming months.
The September 2024 Survey of Consumer Expectations released by the Federal Reserve Bank of New York said,”Consumers are anticipating higher overall price growth. Their more pronounced concerns about rising inflation, particularly at the three- and five-year horizons, reflected heightened uncertainty or expectations about future economic conditions, such as feelings of vulnerability toward price increases, housing affordability, and wage growth.”
At the same time, however, September data released last week by the United States Census Bureau indicated that new single-family home sales reached 738,000 (seasonally adjusted), marking a 4.1% increase from August 2024—the highest rate since May 2023, according to the California Association of Realtors report.
On a year-over-year basis, new home sales rose 6.3% from 694,000 units recorded in September 2023, likely attributed to the ease in mortgage rates in September.
On the supply side, said the California Association of Realtors, new for-sale housing units inched up last month to 473,000 (non-seasonally adjusted) from 472,000 in August, but the months of inventory dipped slightly to 7.6 months from 7.9 months, as sales increased at a faster pace. The overall inventory level stayed elevated and remained sharply higher than the 4.2 months of supply registered for single-family homes in the resale market. The increase in new home sales in September is encouraging, but the sustainability of its upward momentum will be tested in the coming months, as the recent uptick in mortgage rates will likely present challenges in the housing market.
According to Mortgage News Daily, mortgage rates have climbed to the highest level in three months. The average 30-year fixed mortgage rate reached 7% as of October 28, a level not seen since early July.
As a result, mortgage applications have been declining, hitting their lowest level in three months as both purchase and refinancing applications dipped.
The Mortgage Bankers Association’s weekly survey reported that, for the week ending October 18th, the purchase application index dropped 6.7% on a seasonally adjusted basis when compared to the previous week, but the unadjusted purchase index was up 3% from the same week one year ago.
The Refinance Index decreased 8% compared to the previous week and was 90% higher than the same week a year ago, the Mortgage Bankers Association also reported.
