In a week marked by mixed signals, mortgage applications rose 1.0% on a seasonally adjusted basis, driven entirely by a 3% increase in refinancing activity. The unadjusted index, however, fell roughly 10%, reflecting the impact of the Juneteenth holiday. Purchase applications slipped, underscoring persistent buyer hesitation despite a slight decline in borrowing costs.
The 30-year conforming mortgage rate edged down one basis point to 6.59%, according to the Mortgage Bankers Association. While homeowners seized the opportunity to refinance, prospective buyers remained cautious, keeping overall purchase demand subdued. The modest rate improvement did little to ignite new home buying, as affordability challenges and economic uncertainty continued to weigh on sentiment.
New home sales data from the Census Bureau and HUD painted a stark picture. Sales of new single-family homes plunged 7.3% in May to a seasonally adjusted annual rate of 580,000 units. The inventory of unsold new homes climbed to 496,000, representing a 10.3-month supply at the current sales pace, the highest level in years. The median sales price for a new home stood at $424,900.
This inventory overhang poses a direct challenge to major homebuilders. D.R. Horton Inc (NYSE:DHI), Lennar Corp (NYSE:LEN), PulteGroup Inc (NYSE:PHM), and Toll Brothers Inc (NYSE:TOL) rely on steady sales velocity to maintain margins and manage incentives. With supply swelling and demand tepid, builders may face pressure to offer more concessions or reduce prices to move inventory, potentially squeezing profitability.
For mortgage originators like Rocket Companies Inc (NYSE:RKT), the uptick in refinancing provides a partial offset to weakening purchase activity. However, as MBA Chief Economist Mike Fratantoni noted, mortgage rates remained largely flat despite a hawkish tone from the Federal Reserve. The central bank held the federal funds rate at 3.5%-3.75% in its June 17 meeting, citing persistent inflation, particularly from energy costs.
Freddie Mac’s (OTCMKTS:FMCC) weekly survey showed the 30-year fixed rate averaging 6.47% for the week of June 18, down from 6.52% the prior week and below 6.81% a year ago. The next Freddie Mac release is scheduled for Thursday at noon ET. Meanwhile, refinance rates on June 24, based on Zillow Group Inc (NASDAQ:Z) data, stood at 6.53% for a 30-year fixed, 6.59% for a 20-year, and 5.89% for a 15-year fixed. Jumbo 30-year refinance rates were higher at 7.13%.
The Wall Street Journal characterized the modest rate decline as another false start for the housing market, caught between fading geopolitical risks and a Federal Reserve that remains reluctant to cut rates. Economists remain cautious. Christopher Rupkey of FWDBONDS told Reuters there is “not a lot” in the housing data for traditional buyers, while Stephen Stanley of Santander U.S. Capital Markets suggested the housing rebound could be delayed until 2027.
Xactus’ Mortgage Intent Index, which tracks credit-pull activity, fell 10.38% week over week. Thomas Lloyd, Xactus’ chief strategy officer, attributed most of the decline to the Juneteenth holiday and noted that overall mortgage intent remains weak. The data reinforces the view that while refinancing offers a temporary lifeline, a sustained recovery in housing depends on a meaningful pickup in purchase applications, which has yet to materialize.
