Could mortgage interest rates be even lower?

If we took the worst levels of 2023 spreads and included them today, mortgage rates would be the same 0.59% higher now. While we are far from average in terms of spreads, the fact that we have seen this improvement this year is a plus.

In keeping with my 2024 forecast, I never focus on mortgage rates in my projections; I only work with the 10-year interest rate. Plus, spreads had increased in 2023, so they had room to move lower, which they have. However, a big step has already been taken without any rate cuts, meaning you’ll need more help to get mortgage rates below 5.75%.

Buy application data

Since mortgage rates recently fell more than 1%, we’ll draw a line in the sand at that point and monitor purchase application data for the rest of the year. There has been purchase request data in the last 13 weeks eight positive and five negative print. Last week, weekly purchasing apps grew 3%. Yes, purchasing apps have seen a positive development with low fees, folks. Now the year-on-year decline came to 4%, which is the lowest decline since 2022; this is mainly due to the lowest bar ever.

Since mortgage rates began falling in November 2023, weekly purchase data shows 20 positive prints, 18 negative prints and two flat prints. As we can see from the data, not much is happening. However, if mortgage rates can get below 6% and stay there, we should see growth similar to builder purchase application data, which has far outperformed the existing home sales market.

Weekly home inventory data

As mortgage rates have fallen, inventory growth has slowed and will soon become seasonal. We had the Labor Day holiday last week, so take the stock drop in that context. To me, the best story for 2024 was total inventory growth in America, and there was no housing bubble crash.

• Weekly Inventory Change (August 30 – September 6): Inventory has decreased from 704,335 Unpleasant 703,646
• Same week last year (September 1 – September 7): Stock rose from 509,562 Unpleasant 509,892
• The lowest inventory level of all time was in 2022 240,497
• The annual inventory peak for 2024 had expired 704,744
• For some context, the active listings for this week in 2015 were 1,195,353

New advertising data

One of the positive figures this year is that we have achieved growth in new listings data, as 2023 was the lowest level ever. Although 2024 will be the second lowest year on record, it is still positive that we have seen growth this year. I missed my minimum estimate for the weekly peak of new listings during the annual seasonal peak of 80,000. I was off by about 5,000, but still 2024 is a positive year in my book for new listings.

• 2024: 61,599
• 2023: 49,661
• 2022: 58,004

Price reduction percentage

In an average year, a third of all homes are reduced in price; this is the standard home activity. Rising mortgage rates last year and this year have led to increasing levels of price cuts, mainly as inventories have risen. This date line has recently been delayed by falling rates. Also, seasonality and withdrawals are now gaining momentum.

A few months ago I discussed on the HousingWire Daily podcast that price growth rates would cool off in the second half of the year. Here are last week’s price reduction percentages compared to recent years:

• 2024: 39.8%
• 2023: 36%
• 2022: 40%

Weekly ongoing sales

Below you will find the Alto’s research weekly ongoing contract data to reflect real-time demand. We see the seasonal decline in the data line, but there is some year-over-year growth. Remember, mortgage rates started moving toward 8% this time last year, so let’s all put the better year-over-year data into some context.

• 2024: 358,670
• 2023: 348,317
• 2022: 390,543

The coming week: inflation week

Inflation week no longer has the same value as it used to, but it is always something we should keep in mind, especially when some Fed presidents talk about the rise in inflation in the last few months of the year.

Please note that year-over-year figures are capped due to the base effects of last year’s low figures. That’s why the Fed is now focusing on the month-over-month figures. We also have some bond auctions, unemployment claims data, and the used car price index coming out this week. However, I want to see how the bond market reacts after last week’s jobs numbers are processed.