Blog posted On July 23, 2018
Mortgage rates did not move significantly last week, continuing to hold steady. The existing home sales report comes out on Monday, followed by the new home sales report on Wednesday. The weekly mortgage application survey is also scheduled for release on Wednesday.
Existing home sales or resales make up the majority of real estate transactions. Existing home sales declined in May, down a slight 0.4% month-over-month and 3.0% year-over-year. The National Association of Realtors attributed the decline to low supply of homes for sale. At the current sales pace it would take only 4.1 months to exhaust current available inventory, compared to a healthy balance of six-to-seven month supply.
The Mortgage Bankers Association weekly mortgage application survey has been somewhat mixed lately. For the week ending 7/6, new purchase applications increased, but refinance applications declined. For the week ending 7/13, refinance applications were up, and new purchase applications were down. Refinance activity is expected to contract as mortgage rates rise. Most homeowners who could benefit from a refinance have already done so. However, as home values rise, there is typically an increase in cash-out refinances and home equity lines of credit.
New home sales make up a smaller share of real estate transactions than existing home sales or resales. In May, new home sales increased at a record pace, up 6.7% month-over-month, reaching the highest level since November 2017. Growth was driven by the South, where new homes are typically more affordable. Sales in the Northeast and West dropped, and the Midwest was unchanged.
After June’s benchmark interest rate hike, mortgage rates have started to settle, and home buyers have had some reprieve. Available for-sale inventory continues to be a bigger obstacle than affordability in today’s market. It’s not uncommon for homes to receive multiple offers in a short period of time. Real estate professionals recommend buyers get preapproved for mortgage financing before they start shopping, so sellers know they are a viable candidate when they make an offer.