Mortgage rates are on the rise, impacting homebuyer behavior despite steady purchase demand, while the US economy experiences slower growth than expected, influencing housing market dynamics and buyer decisions.
Mortgage rates continue their upward movement, increasing another seven basis points from the prior week according to the Freddie Mac Primary Mortgage Market Survey released April 24th. Despite rates increasing more than half a percent since the first week of the year, purchase demand remains steady. With rates staying higher for longer, many homebuyers are adjusting, as evidenced by this week’s report that sales of newly built homes saw the biggest increase since December 2022.
Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 19, 2024. “Mortgage rates continued to move higher last week, reaching their highest levels since late 2023 and putting a damper on applications activity.” said Joel Kan, MBA’s Vice President, and Deputy Chief Economist. “Purchase applications declined, as home buyers delayed their purchase decisions due to strained affordability and low supply.
The US economy grew at its slowest pace in nearly two years last quarter as inflation topped Wall Street estimates. The Bureau of Economic Analysis’s advance estimate of first quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 1.6% during the period, missing the 2.5% growth expected by economists surveyed by Bloomberg. The reading came in significantly lower than fourth quarter GDP, which was revised up to 3.4%. “This report pours cold water on the misleading narratives of a reaccelerating economy,” EY chief economist Gregory Daco wrote in a research note.
Sales of new U.S. single-family homes rebounded in March from February’s downwardly revised level, drawing support from a persistent shortage of previously owned houses on the market, but momentum could be curbed by a resurgence in mortgage rates. The report from the Commerce Department on Tuesday also showed the median house price jumped to a seven month-high from February, likely as fewer builders offered price cuts and sales shifted to higher priced homes.
