Mortgage rates and demand suggests a slow summer housing market

After a weaker-than-expected spring housing market, summer looks no better. High home prices continue to rise, mortgage rates aren’t coming off recent highs and consumers are unimpressed by the small increase in home listings.

All of that is reflected in weekly mortgage demand, which has been stuck for the second week in a row. Total mortgage application volume was essentially flat last week, up just 0.8% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Mortgage rates didn’t move much either. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.93% from 6.94%, with points unchanged at 0.61 (including the origination fee) for loans with a 20% down payment. That is, however, the lowest rate in more than three months.

Applications to refinance a home loan were unchanged week to week but were 26% higher than the same week one year ago.

“Lower rates, however, were still not enough to entice refinance borrowers back, as most continue to hold mortgages with considerably lower rates,” said Joel Kan, an MBA economist, in a release.

Applications for a mortgage to purchase a home increased 1% for the week but were 13% lower than the same week one year ago. Total housing supply is 18% higher than it was a year ago, according to Zillow, but it is still a very lean market.

“Purchase applications did see a small increase after adjusting for the Juneteenth holiday. Government purchase loans, primarily FHA and VA, saw gains of more than 2 percent over the previous week, as homebuyers in those segments sought to take advantage of the recent rate relief,” Kan added.

Mortgage rates moved sideways to start this week and will likely stay that way until Friday when two important reports on consumer spending and personal consumption expenditures prices are released. Any hint at the current state of inflation tends to have an impact on bond yields and, consequently, mortgage rates.