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Applications to refinance a home loan jumped 15% week-over-week, reaching their highest level since August 2022, according to the Mortgage Bankers Association’s seasonally adjusted index via CNBC. Here are other key data points:
- Demand was 37% higher compared to the same week last year. At that point, mortgage rates were exactly the same.
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) dropped to 6.87% from 7.00%.
- Applications for a mortgage to purchase a home fell 3% for the week and were 14% lower than the same week one year ago.
Our take
We’re not surprised by the spike in refinance applications. We could see this coming after last Thursday’s inflation report, which caused mortgage rates to drop to their lowest level since March. But even though the drop in mortgage rates has translated to a $22k increase in purchasing power, homebuyers aren’t exactly jumping back into the market. They may be waiting until mortgage rates drop even more after the Fed likely cuts interest rates in September. If so, we urge caution when trying to time the market. The situation could change soon. Currently, sellers are dropping their asking prices, as more supply is slowly coming onto the market and listings are growing stale, and buyers are in a position to extract concessions (e.g., rate buydowns, closing cost assistance). But that will change when rates drop and more buyers come off the sidelines. You want to be under contract before that happens.