Mortgage rates increased another seven basis points last week according to the Freddie Mac Primary Mortgage Market Survey as of May 7th. Recent data points to slightly better conditions for buyers with a boost in new-home sales, median new-home prices being down to their lowest level since July 2021, and higher inventory than in recent years. Together, these trends could modestly ease affordability pressures through the spring homebuying season.
Mortgage applications decreased 4.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending May 1st. “The ongoing conflict in the Middle East continues to push rates higher. Mortgage rates last week increased to their highest level in a month,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As expected, elevated rates and shrinking refinance incentives continued to weigh on activity, with refinance applications declining again from the prior week.” Added Kan, “Despite purchase applications declining over the week, overall activity remains higher compared to last year’s pace. Additionally, the average loan size on a purchase application increased to $467,300, the highest in the survey’s history. This increase could indicate that potential first-time buyers, and buyers looking for homes at lower price points, might be the most hesitant to move forward given the economic uncertainty and higher rates.”
Economic activity in the manufacturing sector expanded in April for the fourth consecutive month, say the nation’s supply executives in the latest ISM Manufacturing PMI Report. The report was issued today by Susan Spence, MBA, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. According to Spence, “In April, U.S. manufacturing activity remained in expansion territory, growing at the same pace as the month before. Of the five subindexes that make up the PMI®, the New Orders and Supplier Deliveries indexes indicated faster growth compared to the previous month, the Production Index grew at a slower rate, and the Employment and Inventories indexes remained in contraction. “In this second month of the Iran War (at the time of data collection), 31 percent of the comments were positive and 69 percent negative, with a positive to negative sentiment ratio of 1 to 2.2.”
The number of Americans filing claims for unemployment benefitsrose moderately last week amid low layoffs, underscoring labor market stability and strengthening financial market expectations that the Federal Reserve will not cut interest rates this year. The weekly jobless claims report from the Labor Department continued to show no clear signs of labor market stress from an oil price shock triggered by the U.S.-Israel war with Iran. Fewer people were collecting unemployment checks towards the end of April, though that drop could be the result of some people exhausting their eligibility, which is limited to 26 weeks in most states. Low levels of layoffs are anchoring the labor market. “Fed officials cut interest rates last year because of worries over joblessness and a higher unemployment rate, but right now, there is no reason to consider interest rate cuts whatsoever because the labor market is steady as a rock,” said Christopher Rupkey, chief economist at FWDBONDS.
