Mortgage interest rates are falling, helped by better mortgage spreads

If we took the worst levels of 2023 spreads and included them today, mortgage rates would be the same 0.48% 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.

10-year interest rate and mortgage interest rate

Last week inflation data and testimonials came from Federal Reserve President Jerome Powell was a plus for mortgage rates as the 10-year rate fell to the critical level of 4.20%. This was a tough point to drop further, so the key for this week is to make follow-on buying after we close below 4.20%. If this doesn’t happen soon, we’ll have to wait for more economic data or for the Fed to cut 10-year yields.

Buy application data

The last time we saw 12 weeks of positive growth in trend purchasing apps was when mortgage rates hit 6%. Purchasing apps have been positive four of the last five weeks and mortgage rates aren’t even close to 6%. Now context is critical because we’re working from the lowest bar ever, so it doesn’t take much to move the needle on purchasing apps, as the last five weeks have shown.

However, let’s keep an eye on this story over the next six months because of what the late 2022 and 2023 data has shown us: If mortgage rates fall and we can get at least two to three months of positive data, that will show up in the future existing home sales report. Keep in mind that purchasing apps are available for 30 to 90 days, so the data will later appear in the sales report.

Since mortgage rates started falling in November 2023, we’ve seen it 16 positive prints, 14 negative prints And two flat prints in the week-to-week data. However, when mortgage rates started to rise earlier this year, we saw a drop in demand. The year-to-date data for 2024 is still unfavorable 10 positive prints, 14 negative prints And two flat printing.

Weekly home inventory data

This week’s data was affected by the July 4 bug. Especially when the 4th of July falls on a Thursday or Friday, people tend to take a longer holiday. So I won’t comment on the week-to-week stock decline other than to say it has been influenced by the holidays and we should be back on trend next week.

• Weekly Inventory Change (July 5-12): Inventory has decreased from 652,573 Unpleasant 651,453
• Same week last year (July 7-14): Stock rose from 466,534 Unpleasant 471,603
• The lowest inventory level of all time was in 2022 240,497
• The annual inventory peak for 2024 was 652,573
• For some context, the active listings for this week in 2015 were 1,197,439

New advertising data

The new listings data showed a much sharper drop this week than I expected, but it was the 4th of July weekend so I can’t make anything of it. But I’ll keep an eye on this in the coming weeks. The seasonal decline period will start soon, so we have to get used to the number of new listing data decreasing as the year approaches its end.

It’s a bit shocking to me that the number of new listings this week is lower than last year: this is the lowest new listing week on record. Here are last week’s new offers from past years:

• 2024: 56,638
• 2023: 57,304
• 2022: 71,790

Price reduction percentage

In an average year, a third of all homes are reduced in price; this is the standard home activity. Because interest rates have remained high, the price reduction rate is higher than in the past two years, and certain parts of the US have higher inventory data than the national data.

A few weeks ago, op the HousingWire Daily podcastI discussed that price growth data will cool off in the second half of the year. Here are last week’s price reduction percentages compared to recent years:

• 2024: 38%
• 2023: 33%
• 2022: 33%

Awaiting sales

Below you will find the Alto’s research weekly ongoing contract data year on year to reflect real-time demand. Because there are more sellers who are buyers, we have a little more demand this year. These are live weekly contracts, compared to the purchase request data, looking out to 30-90 days. And our weekly ongoing sales data takes contracts into account.

• 2024: 381,524
• 2023: 377,650
• 2022: 419,524

Next week: Powell talks again, plus retail sales and home sales start

Powell will speak again on Monday and several Fed presidents will also speak this week. I want to see if we get more forgiving statements from other Fed presidents this week. Retail sales are on Tuesday and residential sales are on Wednesday. The big focus in the housing starts figures is whether permits for single-family homes continue to decline, which is not positive for the outflow of construction labor. We also have the all-important data on unemployment claims on Thursday.