Some borrwers were quick to spring into action, with applications for purchase loans rising by a seasonally adjusted 2 percent and requests to refinance up 5 percent week over week.

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Mortgage rates continue to retreat from 2024 highs this week on renewed hopes that inflation is cooling and the Federal Reserve will begin cutting short-term rates as early as September.

Rates began to ease following the Fed’s May 1 meeting, when policymakers said they intend to slow the pace of “quantitative tightening” to less than half the pace envisioned two years ago. They continued to fall with the release of the latest job numbers from the Labor Department Friday, showing employers added fewer jobs than expected in April.

Mike Fratantoni

“Treasury rates and mortgage rates fell last week on the news of a slowing job market, with wage growth at the slowest pace since 2021, and the Federal Reserve’s announced plans to ease quantitative tightening in June and to maintain its view that another rate hike is unlikely,” Mortgage Bankers Association Chief Economist Mike Fratantoni said, in a statement

Some would-be homebuyers were quick to spring into action, with applications for purchase loans rising by a seasonally adjusted 2 percent last week compared to the week before, according to the MBA’s weekly survey of lenders. The increase was driven by a 5 percent gain in FHA purchase applications.

“First-time homebuyers account for roughly half of purchase loans, and the government lending programs are an important source of financing for these homebuyers,” Fratantoni said. “The gain in FHA activity is a sign that this segment of the market is active.”

Many existing homeowners also jumped at the chance to refinance, with refi applications up 5 percent week over week, the MBA mortgage applications survey showed. FHA refi requests were up 29 percent from the week before.

Requests to refinance accounted for 30.6 percent of all mortgage applications, up from 30.2 percent during the week ending April 26, when mortgage rates were hitting their 2024 peaks.

Mortgage rates retreat from 2024 highs

Data tracked by Optimal Blue, showed that after five-consecutive days of declines, borrowers were locking in rates on 30-year fixed-rate mortgages Tuesday at an average rate of 7.03 percent, down 24 basis points from the 2024 high of 7.27 percent recorded on April 25.

While overall mortgage demand picked up last week for the first time in three weeks, purchase loan applications were still down 17 percent from a year ago, and requests to refinance were down 6 percent over the same period.

Although mortgage credit availability has expanded slightly in the past four months, it was little changed in April and remains close to 2012 lows, the MBA said in a separate report that analyzes data from ICE Mortgage Technology.

The Mortgage Credit Availability Index (MCAI), which was benchmarked to 100 in March 2012, rose by 0.1 percent to 94.0 in April.

Joel Kan

“Lenders continue to reduce capacity with mortgage rates still above 7 percent and origination volume moving at a slow pace,” MBA Deputy Chief Economist Joel Kan said in a statement. “Even with challenging affordability conditions and fairly strong housing demand, credit remains tight and housing supply low.”

Fannie Mae’s latest National Housing Survey, released Tuesday, found 67 percent of Americans polled in April said it was a good time to sell a home — the highest level in nearly two years. But only 20 percent of consumers said April was a good time to buy.

As to whether mortgage rates will continue to trend down, economists and investors will be watching for next week’s releases of the Producer Price Index on Tuesday, and the Consumer Price Index on Wednesday.

The CME FedWatch Tool, which tracks futures markets to gauge investor sentiment about future Fed moves, shows investors on Wednesday were pricing in a 66 percent chance that the Fed will cut rates at least once by Sept. 18, up from 54 percent on May 1.

Economists at Pantheon Macroeconomics said the slowdown in April job growth “looks like real weakness” and that future revisions will likely push the numbers down more.

“The slowdown in payroll growth to 175K in April won’t trigger an immediate about-turn at the Fed, given the inherent volatility of the data and the primacy of the inflation numbers,” Pantheon economists said in their May 6 U.S. Economic Monitor. “But the softening adds credibility to the leading indicators—many of which were cited by Chair Powell last week—which point to an extended run of weakening payroll prints.”

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