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Mortgage Rates Slide for the Third Consecutive Week

InventoryMortgage rates continue to dip below the 3% mark, with the 30-year fixed-rate mortgage (FRM) dropping this week to 2.88%, down from last week when it averaged 2.90%, according to Freddie Mac’s latest Primary Mortgage Market Survey (PMMS). A year ago at this time, the 30-year FRM averaged 2.98%.

Freddie Mac also reported the 15-year FRM averaging 2.22% this week, with an average 0.6 point, up from last week when it averaged 2.20%. A year ago at this time, the 15-year FRM averaged 2.48%.

“The summer swoon in mortgage rates continues as the 30-year fixed-rate mortgage fell for the third consecutive week,” said Sam Khater, Freddie Mac’s Chief Economist. “Since their peak at 3.18% in April, mortgage rates have declined by 30 basis points. While this decline is not large, it provides modest relief to borrowers who are purchasing in a market with strong home appreciation and scant inventory.”

Proof of the strength in the purchase market can be found in findings from the Mortgage Bankers Association (MBA), as yesterday’s Weekly Mortgage Applications Survey saw mortgage applications rising 16.0% over the previous week (for the week ending July 9, 2021). Not only did purchase market see gains, but the MBA’s Refinance Index increased 20% over the previous week as well.

A slight rise in inventory has been seen as well, as many prospective buyers are growing tired of fierce bidding wars, and are opting to stay put. A new analysis by Redfin has found that in June 2021, 65% of home offers written by Redfin agents faced competition, down from a revised rate of 72.1% in May, and a pandemic peak of 74.1% in April.

Buyer fatigue has been seen as a factor pushing down the competition rate, with some house hunters moving to the sidelines after repeatedly losing bidding war after bidding war, or are simply getting priced out of the market entirely. Record high home prices are also keeping some on the sidelines, with home prices having grown to astronomical levels—almost 18% year-over-year, May's home price growth dwarfed April’s, which was a steep 14.8%, according to analysts at Black Knight.

However, as rates continue to plummet and remain below the 3% mark, millennials, those born between 1980-1999, are driving purchase activity, with the percentage of purchase activity increasing for the third consecutive month, according to the ICE Mortgage Technology Millennial Tracker. In May, 67% of loans closed by millennials on the Encompass by ICE Mortgage Technology origination platform were for purchases, up from 61% in April 2021, and 51% in March 2021.

“Across the country, we’re seeing a strong and competitive purchase market, particularly among millennials,” said Joe Tyrrell, President of ICE Mortgage Technology. “With FICO score requirements loosening, millennials are taking advantage of the current environment to continue to jump into homeownership,” Tyrrell said.

"Mortgage rates remain very favorable and will help to offset rising home prices. For buyers seeking predictable monthly payments, the continuation of low rates will enable them to keep searching for the perfect home with the peace of mind that their housing costs will remain steady for years to come with a low fixed rate mortgage," said Realtor.com Senior Economist George Ratiu. "In addition, after nearly a year of consumer demand outstripping supply and double-digit price appreciation, we are seeing more sellers listing their homes. The influx of fresh listings is helping moderate record-breaking price growth, presenting more opportunities for weary buyers. However, affordability will remain a challenge for many first-time buyers, as the monthly payment for the typical home is still $115 higher this week than it was a year ago.”

As the labor force replenishes its ranks, more have regained their financial footing, as the U.S. Department of Labor reported that for the week ending July 10, the advance figure for seasonally adjusted initial unemployment claims was 360,000, a decrease of 26,000 from the previous week's revised level, marking the lowest level for initial claims since March 14, 2020 when it was 256,000.

“Conditions in the labor market have continued to improve, but there is still a long way to go. Labor demand appears to be very strong; job openings are at a record high, hiring is robust, and many workers are leaving their current jobs to search for better ones,” Federal Reserve Chair Jerome Powell told the House Financial Services Committee Wednesday. “Indeed, employers added 1.7 million workers from April through June. However, the unemployment rate remained elevated in June at 5.9%, and this figure understates the shortfall in employment, particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year. Job gains should be strong in coming months, as public-health conditions continue to improve and as some of the other pandemic-related factors currently weighing them down diminish.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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