Market Recap: Home Prices Up, Mortgage Apps Down, Pending Home Sales Decline
Mortgage rates have not moved significantly this week, trending slightly upward following Federal Reserve Chair Jerome Powell’s Jackson Hole Symposium speech. The Fed is expected to continue raising rates to keep up with strong economic growth. The S&P CoreLogic Case-Shiller home price index appreciated in June, but at a slower pace. Both new purchase and refinance mortgage application submissions declined. Pending home sales fell for the seventh straight month.
The Case-Shiller home price index is based on changes in the value of homes involved in two or more sales transactions in twenty major metropolitan areas throughout the country. In June, the 20-city index increased a seasonally adjusted 0.1% month-over-month and 6.3% year-over-year. Based on this data, and last week’s Federal Housing Finance Agency (FHFA) house price index, home price appreciation has started to slow. Las Vegas, Seattle, and San Francisco led price appreciation trends, each posting double-digit annual gains. Only New York City saw a month-over-month decline, possibly due to new tax laws.
The Mortgage Bankers Association (MBA) weekly mortgage application survey resumed its downward trend for the week ending 8/24. After increasing the previous week, new purchase applications fell 1.0% and refinance applications are down 3.0% for a composite decrease of 1.7%. Although home price appreciation has slowed, it’s still triple its historic pace and three times the rate of wage growth, according to Aaron Terrazas, senior economist at Zillow. He said, “it’s a seller’s market and will continue to be, unless there is dramatic shift in inventory or dramatic shift in interest rates.”
The pending home sales index tracks changes in the homes that are under contract but not yet sold. In July, pending home sales dropped off 0.7% month-over-month and 2.3% year-over-year, the seventh straight month of declines. Limited available homes for sale are driving home prices up and creating a competitive market. National Association of Realtors (NAR) chief economist Lawrence Yun explains, “The reason sales are falling off last year's pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.”
Sustained home price appreciation has led to record-high home equity. Still, fewer homeowners than ever are tapping into equity. Responsible use of home equity for home repair or renovation, could improve the value of the home over time. Although interest rates are expected to continue rising, mortgage rates are still low by historic standards. If you have any questions about refinancing to access home equity, consult a mortgage professional.
Sources: CNBC, CNBC, Econoday, MarketWatch, MarketWatch, Mortgage News Daily