An aerial view shows a subdivision that has replaced the once rural landscape on July 19, 2023 in Hawthorn Woods, Illinois.
Mortgage interest rates eased very slightly last week, but not enough to get today's potential homebuyers off the fence.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.82% from 6.87%, with points increasing to 0.59 from 0.57 (including the origination fee) for loans with a 20% down payment, according to the Mortgage Bankers Association. That is the lowest level since February of this year.
Rates have dropped over twenty basis points in the last few weeks, but applications for a mortgage to purchase a home still dropped another 4% last week compared with the previous week, on the MBA's seasonally adjusted index. Purchase demand is now 15% lower than it was the same week one year ago. A basis point is one-hundredth of a percentage point.
"Purchase applications decreased as ongoing affordability challenges persist with rates at their current levels and with home-price appreciation still strong in many markets," said Joel Kan, an MBA economist in the release.
Homebuyers are also likely waiting for interest rates to drop further. The expectation is the Federal Reserve will cut its rate in September. While mortgage rates don't follow the Fed exactly (they follow loosely the yield on the 10-year Treasury), rates will come down if investors believe inflation is easing.
