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Mortgage Rates Could Ruin Summer Home-Sales Hopes

NEW YORK (TheStreet) -- New figures on the U.S. residential real estate market show a slowdown nationwide, right in the heart of the summer selling season.

June and July are usually the busiest months of the year for real estate agents, as parents like to cement a home deal before the school year opens in September.

Right now, though, the market isn't as aggressive as real estate professionals would like. Data from the Mortgage Bankers Association show June mortgage applications down 5% from May, a reversal for the real estate market in most years.

Also see: Good Time to Be a Landlord, but Buy in the Right Places

It's true May was a standout month for homebuyers, with sales of existing homes up by 4.9%, according to The next reading comes out July 22, and it could be difficult for the real estate market to match its high level of activity for May. In fact, if the MBA numbers are any indication, slow or no growth could be the case for the rest of the summer or even the year.

Not only were mortgage applications down by 5%, but the average loan size of new homes decreased from $296,427 in May to $296,078 in June.

The MBA's outlook for new-home sales sees no change overall, on an unadjusted basis, from May to June.

One theory why home sales are slowing: Mortgage rates are rising, albeit slowly, and that could be keeping buyers away from locking down a home this summer.

Also see: Only 10 States Have 'Stable' Housing Markets

"Mortgage rates increased for the week as the labor market appears to be improving," says Frank Nothaft, vice president and chief economist for mortgage agency Freddie Mac. "Based on the U.S. employment report released last week, the U.S. economy added 288,000 jobs in June, gained 224,000 in May and increased by 304,000 in April. Also, the unemployment rate in June fell to 6.1% from 6.3% in May."

According to the BankingMyWay Weekly Mortgage Rate Tracker, 30-year fixed mortgage rates rose to 4.28%, up from 4.20% last week. Five-year adjustable rate mortgages also rose, to 3.33% from 3.11%, signaling it could be just a bit tougher to land a mortgage right now.

That, unfortunately, might be enough to pull the reins back on the housing market just when the market needs buyers the most.

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