Intrigued by the impact of lower mortgage rates on housing demand data? Disappointed by the lack of positive trends? Let’s dive into this week’s tracker to unravel the effects of lower rates on crucial data lines.
Purchase Application Data:
- Historical Insight:
The key to sustained growth in the existing home sales market, according to me, lies in sub-6% mortgage rates. Back in early 2022, CNBC tapped into this idea when questioning my views.
- Recent Trends:
In late 2022, a drop in mortgage rates below 6% sparked 12 weeks of positive data and a remarkable existing home sales report. However, subsequent rate increases led to a decline in sales. As rates dropped again towards the end of 2023, albeit not below 6%, we witnessed a brief uptick in sales. The cyclic nature of the market compelled me to predict a slowdown in monthly home sales earlier this year, indicating a direct correlation between rates and sales performance.
- Current Scenario:
With the recent dip in mortgage rates, hopes were high for a repeat of the 2022 surge. However, the data reflects only minimal positivity at this point. Over the past nine weeks, we’ve had five positive purchase application weeks compared to four negatives. While showing a cumulative 14% uptick against a 12% decline, lower rates have only moderately affected demand so far.
- Pending Home Sales:
Despite initial June positivity, the recent pending home sales data registers as overall steady, building upon an earlier positive trend when rates were hovering around 7.5%.
Weekly Housing Inventory Data:
- Inventory Insight:
A notable highlight of 2024 has been the steady growth in housing inventory, in stark contrast to the dire levels of 2022. Higher rates can potentially spur inventory growth when mortgage demand wanes.
- Past Trends and Projections:
A consistent high-rate scenario above 7.25% is likely to drive weekly inventory growth between 11,000 to 17,000 homes, which has closely mirrored actual data several times this year, affirming the predictive model. Even during the recent rate reductions, inventory growth remained favorable, though falling slightly short of the growth projections.
- Recent Inventory Growth:
The last three weeks showed a healthy increase in inventory, although not meeting the projected targets. Nonetheless, as we head towards seasonal inventory patterns, continued growth remains a positive sign.
In Conclusion:
While housing demand hasn’t shown a significant upsurge with lower rates, refinancing activities have seen a notable uptick. The key moving forward will be to monitor purchase application data and mortgage spreads closely, especially as we approach the end of the seasonal housing period. By keeping an eye on these vital factors and potential rate cuts by the Fed, we can adapt to the evolving landscape of the U.S. housing market.
