The downward trend of mortgage interest rates has continued this week, with average rates reaching 2.91% for a 30-year fixed rate loan, according to the weekly report by Freddie Mac. This is a decrease from last week’s rates when they reached 2.99%, but is still just slightly higher than their lowest rate on record from two weeks ago when they dropped down to 2.88%. For 15-year fixed rate loans the numbers decreased to 2.46%, down from 2.54% a week prior.
Despite these low rate applications for both purchase and refinance loans have seen slight decreases in recent weeks. According to the latest report from the Mortgage Bankers Association, purchase applications decreased 1.8% from one week earlier, but they are still considerably higher than they were a year ago. “The home purchase market remains a bright spot for the overall economy,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase applications were essentially unchanged, but were 33 percent higher than a year ago – the 14th straight week of year-over-year gains.”
Refinance applications have also seen small decreases after a steady upward climb during most of the first half of the year. Those numbers decreased 11% compared to last week, but is still 34% higher than the same week last year. Refinances made up 62.6% of total applications (down from 64.6% last week).
Other home buying trends have started to emerge after two a summer of Covid-influenced buying patterns. Redfin RDFN reports the size of homes people are buying has increased—in July alone the sales of “large” homes (which they defined as 3,000-5,000 square feet) was 21% higher compared to July 2019. Sales of homes that were either small or medium-sized only increased 2.3% and 10%, respectively. If you compare overall square footage, the size of sold homes in August was 3.7% larger compared to last August.
This shift in preferences may end up helping the shortage of listings that has plagued the housing market in recent years. According to the same Redfin report, larger homes are entering the market in greater numbers than small homes (perhaps because sellers realize this is the time to get the highest price for the sale). New listings for large homes increased 7.6% year-over-year, but were down 8.3% and 1% for for small homes and medium-sized homes. Owners of larger homes have noticed that demand for homes as big as their has gone up suddenly this summer and are taking advantage of the shift in momentum while they can.
“This year has been anything but normal and as the uncertainty lingers, mortgage rates remain near record lows,” said Sam Khater, Freddie Mac’s Chief Economist. “These rates continue to incentivize potential buyers and the home buying season, which shifted from spring to summer, will likely continue into the fall.”