For the second week in a row, mortgage rates increased by another four basis points according to the Freddie Mac Primary Mortgage Market Survey released October 2nd. However, they remain about 40 basis points lower than the 52-week average. The last few months have brought in lower rates and as indicated by the recently reported increase in pending home sales, homebuyers are feeling more confident getting into the market.
Mortgage applications decreased 12.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 26th. “Mortgage rates increased to their highest level in three weeks as Treasury yields pushed higher on recent, stronger than expected economic data. After the burst in refinancing activity over the past month, this reversal in mortgage rates led to a sizeable drop in refinance applications, consistent with our view that refinance opportunities this year will be short-lived,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. Kan added “Purchase applications were down slightly over the week after three consecutive increases, but the strength of the purchase market has also been impacted by other factors such as broader economic conditions, the health of the job market, and housing inventory.”
Consumer sentiment continued to slide in September, falling to its lowest point since May, as tariffs seep into product prices and Americans start to spend more cautiously. The University of Michigan’s preliminary September sentiment index, released Friday, declined 4.8% to 55.4 from 58.2 in August. “Consumers continue to note multiple vulnerabilities in the economy, with rising risks to business conditions, labor markets, and inflation. Likewise, consumers perceive risks to their pocketbooks as well,” Joanne Hsu, director of the Surveys of Consumers at U. of Michigan, said in a statement. Tariff policies are top of mind for many Americans, too, she said, noting that about 60% of consumers raised the topic in interviews. “The corrosive uncertainty surrounding tariffs, other economic policies and immigration, continues to weigh on consumer sentiment, High Frequency Economics analysts said in a research note.
Pending sales of existing homes rose in August, as a decline in mortgage rates helped spur activity in the housing market. Pending sales, based on signed contracts, rose 4% last month from July and increased 3.8% from a year earlier, the National Association of Realtors® reported Monday. The uptick came as average mortgage rates eased in August, and are down modestly from July, according to Freddie Mac. “While lower borrowing costs provided some relief, high housing costs continue to limit overall movement in the market,” says Realtor.com® Senior Economic Research Analyst Hannah Jones. Despite the August uptick, pending home sales as measured by the NAR remain well below the typical levels recorded in the 20 years prior to late 2021. In addition to harsh affordability conditions, the dearth of supply has limited choices for buyers. While inventory has improved significantly in the South and West, it remains tight in the Midwest and Northeast compared to pre-pandemic levels.
