Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) [1] has found that the 30-year fixed-rate mortgage (FRM) averaged 2.77% for the week ending August 5, 2021, down from last week [2] when it averaged 2.80%. A year ago at this time, the 30-year FRM averaged 2.88%.
Also this week, the 15-year FRM averaged 2.10% with an average 0.6 point, unchanged from last week [2]. A year ago at this time, the 15-year FRM averaged 2.44%.
“With global market uncertainty surrounding the Delta variant of COVID-19, we saw 10-year Treasury yields drift lower and consequently mortgage rates followed suit,” said Sam Khater [3], Chief Economist at Freddie Mac. “The 30-year FRM dipped back to where it stood at the beginning of 2021, and the 15-year fixed remained at its historic low. This bodes well for those still looking to refinance, renovate or even purchase a new home.”
Realtor.com Chief Economist Danielle Hale said, "Upcoming economic data will provide some clues about how much the Delta-variant surge is impacting the economic recovery and what that might mean for the future. Wednesday’s data on private hiring from ADP shows that July added fewer than half as many jobs as June. This has lowered expectations for Friday’s jobs report and a better than expected report could mean a corresponding uptick in mortgage rates as early as Friday. Whether that continues into the following week will be dependent on the news and data of the day. Eventually, we expect rates to begin to climb, but the timing of this increase is dependent on how the latest health threat evolves and its impact on the Fed’s monetary stance."
As rates continue to drop, refis continue to hold a lion’s share of mortgage application volume, as the refi share of mortgage activity increased slightly this week to 67.6% of total applications from 67.5% the previous week, according to the Mortgage Bankers Association (MBA) [4].
As Khater noted, with the opportunity to save extra money through a refi, many homeowners are targeting upgrades and renovations by taking advantage of rates still below the 3% margin.
Bank of America recently issued its “2021 Homebuyer Insights Report: Home Improvement and Equity Spotlight [5],” which found that two-thirds of younger homeowners surveyed planned to renovate their homes this year [6]. The survey found that there is no lack of means in which to perform these renovations, as real home equity reached a new peak of $20.2 trillion in Q2 of 2021.
Spurred by pandemic-related factors such as remote work situations and the need for a home office, and more recreational space for the family has led many owners to tailor their homes to their needs. Twice as many respondents in the Bank of America poll [5] reported they’re approaching home improvements as a means of greater enjoyment in their living space (67%), compared to those seeking to increase their home’s value (33%).
Home prices continue to rise, as short supply has played a role in this latest price hike. CoreLogic reports in its latest Home Price Index (HPI) and HPI Forecast [7] for June 2021 has found that home prices nationwide increased 17.2% compared to June 2020, a rate not seen for this metric since the late-1970s.
“With plenty of cash on the sidelines, along with very low mortgage rates, prices are heading up and affordability will become a more acute issue for the foreseeable future,” said Frank Martell [8], President and CEO of CoreLogic.