Mortgage refinancing increased 35% over the past week, according to the Mortgage Bankers Association (MBA). It’s just one sign that things might be shifting in the U.S. residential real estate market.
Released Wednesday, the MBA’s Weekly Applications Survey also showed that the refinancing index increased 118% compared to the same week one year ago. CNBC explained that: “it appears to have taken a few weeks for current homeowners to realize mortgage rates had dropped dramatically. And when they did, they acted.”
MBA’s report also showed that mortgage loan applications increased 16.8% during the week ending Aug. 9 compared to the previous week. It showed that the unadjusted purchase index increased 3% compared to the previous week, while it was 8% lower than the same week a year ago.
“Rates on both 30- and 15-year fixed rate mortgages decreased for the second consecutive week, and combined with the previous week’s rate moves, spurred another strong week for application activity as borrowers with higher rates took the opportunity to refinance,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Overall applications increased almost 17% to the highest level since January 2023, driven by a 35% increase in refinance applications.”
Kan said the refinance index saw its strongest week since May 2022. With the purchase index up, he also said it seems like prospective homeowners are “slowly reentering the market.”
While the number of new mortgages is growing, Axios noted that it is “still extremely low”. At 6.5%, new 30-year fixed mortgage rates may be down from a high of 7.22%, but they are still higher than most outstanding mortgages.
“That’s depressing both purchases of homes and refinance activity,” said the outlet.
Interest rates set by the Federal Reserve Bank to bring down inflation have been impacting the housing market. With 11 rate hikes, the Fed intended to slow spending and bring inflation down. According to the Fed’s most recent Federal Open Market Committee statement, it was still looking for stronger indicators that inflation would be down to 2% before it would begin slashing rates.
Audacy reported Wednesday that overall inflation in the U.S. had finally dropped lower than 3% for the 12-month period ending in July. However, Consumer Price Index prices increased by 0.2% month-over-month, per the Bureau of Labor Statistics. Additionally, other factors are also putting pressure on home buyers.
“Today’s homebuyers are dealing with a lot more than high interest rates,” said CNBC. “They are still up against high home prices and low supply. There is also a feeling among some buyers, according to agents, that mortgage rates may fall even lower, so they are waiting before making such a large purchase.”
This week, the National Association of Realtors said in a press release that home price gains were reported in almost 90% of metro markets during the second quarter of 2024. For the first time since the NAR began tracking metro area single-family home prices in 1979 one of these metro areas (San Jose, Calif.) had a median price that exceeded $2 million.