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Mortgage Activity Declines in November as Rates Continue to Increase

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The Market Composite Index, a measure of mortgage loan application volume by the Mortgage Bankers Association’s (MBA) weekly survey, decreased 14.5%, month-over-month, in November on a seasonally adjusted (SA) basis. The slowdown in mortgage activity can be attributed to higher mortgage rates as the ten-year Treasury yield increased in November, reflecting uncertainties surrounding the elections.

The market decline was reflected primarily in the Refinance Index (SA), which decreased by 33.2% month-over-month. Meanwhile, the Purchase Index (SA) showed a modest increase of 2.7% over the same period. However, compared to October 2023, the Market Composite Index is up by 16.4%, with the Purchase Index seeing a slight 4.8% increase and the Refinance Index higher by 45.9%.

The average contract rate for 30-year fixed mortgage rate per the MBA survey for November averaged at 6.8%, 29 basis points (bps) higher month-over-month in response to a higher ten-year Treasury rate.

Loan size metrics also reflected market adjustments. The average loan size for the total market (including purchases and refinances) shrank 2.9% month-over-month on a non-seasonally adjusted (NSA) basis, decreasing from $389,800 to $378,400. Loan sizes for purchasing and refinancing decreased. Purchase loans averaged $436,200, down 2.7% from $448,300, while refinance loans saw a sharper 9.9% decrease, with the average loan size falling from $322,500 to $290,600. Adjustable-rate mortgages (ARMs) also declined 6.0%, from $1.15 million to $1.08 million.

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Mortgage Rates Rise in November Amid Post-Election Market Volatility

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Mortgage rates climbed in November, driven by market volatility and a surge in Treasury yields following the recent elections. On the day after the election results, the 10-year Treasury yield spiked by 14 basis points (bps), setting the stage for further rate increases throughout the month.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage increased 38 basis points from October, reaching 6.81%. Meanwhile, the 15-year fixed-rate mortgage saw an even steeper increase of 43 bps to land at 6.03%.

The 10-year Treasury yield, a key benchmark for mortgage rates, averaged 4.37% in November—38 bps higher than October’s average. This increase reflected heightened market uncertainty and persistent volatility. Looking ahead, the Federal Reserve is set to meet on December 17-18 to evaluate the possibility of another rate cut. Since the federal funds rate influences interest rates, a rate cut could potentially ease long-term mortgage rates, but this decision will hinge on the latest employment and inflation data, and other macroeconomic factors that could have an upward pressure on inflation including larger government deficits and higher tariffs. NAHB forecasts additional declines to the federal funds rate into a range below 4%.

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Higher Mortgage Interest Rates Slow Housing Production in October

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Housing starts edged lower last month as average monthly mortgage rates increased a quarter-point from 6.18% to 6.43% between September and October, according to Freddie Mac.

Overall housing starts decreased 3.1% in October to a seasonally adjusted annual rate of 1.31 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The October reading of 1.31 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 6.9% to a 970,000 seasonally adjusted annual rate. On a year-to-date basis, single-family construction is up 9.3%. The volatile multifamily sector, which includes apartment buildings and condos, increased 9.6% to an annualized 341,000 pace but are down 29.3% on a year-to-date basis.

Although housing starts declined in October, builder sentiment improved for a third straight month in November as builders anticipate an improved regulatory environment in 2025 that will allow the industry to increase housing supply. Further interest rate cuts from the Federal Reserve through 2025 should result in lower interest rates for construction and development loans, helping to lead to a stabilization for apartment construction and expansion for single-family home building.

While multifamily starts increased in October, the number of apartments under construction is down to 821,000, the lowest count since March 2022 and down 18.9% from a year ago. In October, there were 1.8 apartments that completed construction for every one apartment that started construction. The three-month moving average reached a ratio of 2 in October.

There were 644,000 single-family homes under construction in October, down 3.6% from a year ago and down 22% from the peak count in the Spring of 2022.

On a regional and year-to-date basis, combined single-family and multifamily starts are 10.4% higher in the Northeast, 1.7% lower in the Midwest, 5.0% lower in the South due to hurricane effects, and 4.4% lower in the West.

Overall permits decreased 0.6% to a 1.42 million unit annualized rate in October. Single-family permits increased 0.5% to a 968,000 unit rate and are up 9.4% on a year-to-date basis. Multifamily permits decreased 3.0% to an annualized 448,000 pace.

Looking at regional data on a year-to-date basis, permits are 0.9% higher in the Northeast, 3.9% higher in the Midwest, 2.4% lower in the South and 4.8% lower in the West.

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Mortgage Rates Reversed Downwards Trend in October

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In October, mortgage rates reversed their recent downward trajectory, returning to levels two months earlier. According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage increased 25 basis points (bps) from September to 6.18%. The 15-year fixed-rate mortgage saw an even steeper increase of 34 bps to land at 5.60%.

These increases coincided with heightened volatility in the 10-year Treasury yield, which jumped 38 bps over the month, moving from 3.72% in September to 4.10%. This spike followed a weaker-than-expected labor report driven by the disruptions from two hurricanes, as well as the Boeing strike, and the 2024 election.

However, the largest part of the increase for interest rates is due to growing, post-election concerns over budget deficits. NAHB will be revising its interest rate outlook as the final election results are determined and the fiscal policy position comes into focus. Nonetheless, long-term interest rates have increased since September due to election developments.

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Mortgage Activity Declines in October as Mortgage Rates Increase

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The Market Composite Index, a measure of mortgage loan application volume by the Mortgage Bankers Association’s (MBA) weekly survey, decreased 13.9% month-over-month on a seasonally adjusted (SA) basis due to higher mortgage rates. This decline was reflected in both the Purchase and Refinance Indices, which fell by 4.4% and 23%, respectively. However, compared to October 2023, the Market Composite Index is up by 39%, with the Purchase Index seeing a slight 1.9% increase and the Refinance Index higher by 149.9%.

The average 30-year fixed mortgage rate reversed its downward trajectory with an increase of 36 basis points (bps), following volatility in the ten-year Treasury yield. This brought the rate back to around the same level as it was in August at 6.53%. However, compared to its peak last October, the current rate is 125 bps lower.

The average loan size for the total market (including purchases and refinances) was $390,225 on a non-seasonally adjusted (NSA) basis, a decrease of 2.6% from September. Purchase loans grew by 2.1% to an average of $448,675, while refinance loans declined by 11.3% to $323,750. Adjustable-rate mortgages (ARMs) saw a modest decrease of 3.4% in average loan size from $1.19 million to $1.15 million.

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Mortgage Rates Continue Downward Trend in September

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In September, mortgage rates maintained their downward trajectory, returning to levels last seen two years ago. According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage fell to 6.18%, a decline of 32 basis points (bps) from August. The 15-year fixed-rate mortgage saw an even steeper decline, decreasing by 42 bps from August to 5.26%. Additionally, the 10-year Treasury rate declined by 23 bps, falling from 3.98% in August to 3.75%.

According to the NAHB forecast, the 30-year mortgage rate is expected to near 6% on a sustained basis by the end of 2024, with a further decline to just below 6% during 2025. NAHB also predicts furthering easing by the Federal Reserve before the end of 2024.

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Existing Home Sales Slide Despite Lower Mortgage Rates

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Existing home sales fell to a 10-month low in August despite easing mortgage rates and improved inventory, according to the National Association of Realtors (NAR). Home sales remained sluggish as the lock-in effect kept home prices elevated. Meanwhile, the share of first-time buyer in August dropped to a record low. However, we expect increased activity in the coming months as mortgage rates continue to moderate. Improving inventory is likely to ease home price growth and enhance affordability.

Homeowners with lower mortgage rates have opted to stay put, avoiding trading existing mortgages for new ones with higher rates. This trend is driving home prices higher and holding back inventory. With the Federal Reserve beginning its easing cycle at the September meeting, mortgage rates are expected to gradually decrease, leading to increased demand and unlocking lock-in inventory in the coming quarters.

Total existing home sales, including single-family homes, townhomes, condominiums, and co-ops, fell 2.5% to a seasonally adjusted annual rate of 3.86 million in August, the lowest level since October 2023. On a year-over-year basis, sales were 4.2% lower than a year ago.

The first-time buyer share dropped to 26% in August, the lowest level since November 2021, down from 29% in both July and August 2023.

The existing home inventory level rose from 1.34 million in July to 1.35 million units in August and is up 22.7% from a year ago. At the current sales rate, August unsold inventory sits at a 4.2-months supply, up from 4.1-months last month and 3.3-months a year ago. This inventory level remains low compared to balanced market conditions (4.5 to 6 months’ supply) and illustrates the long-run need for more home construction. However, the count of single-family resale homes available for sale is up almost 21.4% on a year-over-year basis.

Homes stayed on the market for an average of 26 days in August, up from 24 days in July and 20 days in August 2023.

The August all-cash sales share was 26% of transactions, down from 27% in both July and a year ago. All-cash buyers are less affected by changes in interest rates.

The August median sales price of all existing homes was $416,700, up 3.1% from last year. This marked the 14th consecutive month of year-over-year increases. The median condominium/co-op price in August was up 3.5% from a year ago at $366,500. This rate of price growth will slow as inventory increases. Existing home sales in August were mixed across the four major regions. In the Northeast, South, and West, sales fell by 2.0%, 3.9%, and 2.7%, respectively, while sales in the Midwest remained unchanged. On a year-over-year basis, sales decreased in the Midwest (-5.2%), South (-6.0%) and West (-1.4%). Sales in the Northeast were unchanged from a year ago.

The Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts. The PHSI fell from 74.3 to 70.2 in July due to persistent affordability challenges. On a year-over-year basis, pending sales were 8.5% lower than a year ago per National Association of Realtors data.

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Mortgage Rates Continued to Decline in August

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Mortgage rates continued to decrease in August, landing at an average rate of 6.50%. According to Freddie Mac, the average monthly rate fell by 35 basis points (bps) from July’s rate of 6.85%. The August rate is down 57 bps from one year ago, which stood at 7.07%.

The 15-year fixed-rate mortgage also saw a decrease, dropping by 45 bps from July to 5.68%, and is now lower compared to last August by 75 bps. Additionally, the 10-year Treasury rate declined 30 bps from 4.28% in July to 3.98%.

Per the NAHB forecast, we expect 30-year mortgage rates to decline slightly to around 6.66% at the end of 2024 and eventually to decline to just under 6% by the end of 2025. The NAHB outlook anticipates the federal funds rate to be cut by 25 bps no later than the December Federal Reserve meeting, although it is possible for the Fed to cut rates in the upcoming FOMC meeting in September.

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Refinancing Activity Jumped in August as Mortgage Rates Declined

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The Market Composite Index, a measure of mortgage loan application volume by the Mortgage Bankers Association’s (MBA) weekly survey, saw a month-over-month increase of 10.7% on a seasonally adjusted (SA) basis. Compared to last August, the index increased by 20.8%. While the Purchase Index declined by 2.9%, month-over-month, the Refinance Index jumped 30.8% as borrowers took advantage of the declining mortgage rates to refinance higher-rate loans. On a yearly basis, the Purchase Index is down by 8.6%, while the Refinance Index increased by 87.2%.

The average monthly 30-year fixed mortgage rate has fallen for four straight months with August seeing the largest decrease of 40 basis points (bps), bringing the rate to 6.49%. The current rate is 73 bps lower than last August.

The average loan size for the total market (including purchases and refinances) is up 3.6% from July to $380,800 on a non-seasonally adjusted (NSA) basis. Similarly, the month-over-month change for purchase loans increased 0.6% to an average size of $426,600, while refinance loans rose by 18.5% to an average of $325,800. The average loan size for an adjustable-rate mortgage (ARM) also saw a steep increase of 9.5% for the same period, from $1.01 million to $1.1 million.

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Small Decrease in Mortgage Activity for July

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The Market Composite Index, a measure of mortgage loan application volume by the Mortgage Bankers Association’s (MBA) weekly survey, saw a slight month-over-month decline of 0.8% on a seasonally adjusted (SA) basis; compared to July 2023, the index increased by 0.5%. The Purchase Index declined by 4.8%, while the Refinance Index increased by 5.8%, month-over-month. On a yearly basis, the Purchase Index decreased by 13.9%, while the Refinance Index increased by 33.9%.

Meanwhile, the average monthly 30-year fixed mortgage rate continued to decline for three straight months with July seeing the largest decrease of 10 basis points (bps) to land an at 6.88% in July. The current rate is also lower than last July by 6 bps.

The average loan size for the total market (including purchases and refinances) is down by 1.5% from June to $367,900 on a non-seasonally adjusted (NSA) basis in July. Similarly, the month-over-month change for purchase loans decreased 1.6% to an average size of $424,200, while refinance loans increased by 2.5% to an average of $275,325. The average loan size for an adjustable-rate mortgage (ARM) decreased by 2.5% for the same period, from $1.03 million to $1.01 million.

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