Applications to refinance a home loan, which are usually highly rate-sensitive, decreased 3 percent from the previous week. Volume was 33 percent lower annually, as interest rates were considerably lower last year.
Mortgage applications to purchase a home also fell, declining 1 percent for the week. Volume was 3 percent higher than the same week one year ago but should be much higher given the improved economy and strong demand.
The problem is home prices. Buyers today simply can’t afford the red-hot competition in most major markets, so they are pulling back. Home prices are still rising, but the pace has slowed in the last few months as some sellers sit on the market longer. Yet prices are nowhere near falling on a national scale and are unlikely to, given the strong housing demand.
“Home value appreciation has slowed, but it’s still triple its historic pace and three times the rate of wage growth,” Aaron Terrazas, senior economist at Zillow, said in an interview on CNBC’s “Power Lunch” on Tuesday. “It’s still a seller’s market and will continue to be, unless there is dramatic shift in inventory or dramatic shift in interest rates.”
Mortgage rates are under pressure this week, as the yield on the 10-year U.S. Treasury bond, which they follow loosely, is now rising again. Rates have moved within a very small range this summer but are showing signs they could begin to break higher.