U.S. Mortgage rates fell to another record low last week, but new applications eased as a lack of new homes on the market, and rising prices, kept buyers at bay even as the broader domestic economy continues to improve.
The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $510,400 fell 1 basis point to 3.29% for the week ending June 126, a new all-time low and a full 1% down from the same period last year.
The MBA's refinancing index fell 2.2% to 3,359.2 points, notching its second consecutive weekly dip, while applications also fell for the second week in a row. The seasonally-adjusted Purchase Index, which tracks mortgage applications for the purchase of a single family home, fell 1.3% to 758.9 points.
“Mortgage applications fell last week despite mortgage rates hitting another record low in MBA’s survey. Investors are contemplating the risks of the recent resurgence of COVID-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result,” said Joel Kan, the MBA’s associative vice president of economic and industry forecasting.
"The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers’ options," he added. "The average purchase application loan size increased to a record high in our survey – more proof that tight inventory conditions are leading to faster price growth."
U.S. home prices rose 4% in April, the S&P CoreLogic Case-Shiller index noted Tuesday, the biggest gain since December of 2018, with prices in 12 of the index's 20 cities posting all-time highs.
Earlier this week, the National Association of Realtors said its index of pending home sales rose by a record 44.3% in May, following its historic April decline, as buyers returned to the market enticed by low mortgage rates and improving job prospects.
"The outlook has significantly improved, as new home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be down by less than 10%," said the NAR's chief economist Lawrence Yun. "Even after missing the spring buying season due to the pandemic lockdown."