Shiny Trinket

Housing market gets brief shot of adrenaline

What a difference a day makes. A small-but-brief drop in interest rates can make one big ripple even when there is an otherwise tepid mortgage demand.

Realtor.com’s Diana Olick reports that total mortgage application volume jumped 9.4% last week compared with the previous week, according to the Mortgage Bankers Association (MBA), resulting in an adjustment for the July Fourth holiday.

The average contract interest rate was the lowest level in three months, accompanied by a 9% jump in refinance applications — 56% higher than the same week one year ago. Refinance demand has been particularly weak because mortgage rates were stuck at high levels for so long.

That 9% was mirrored by the same increase in mortgage loan applications for the week and was 25% higher than the same week one year ago.

She cites the MBA’s Joel Kan, who says, “Homebuyer demand is being fueled by increasing housing inventory and moderating home-price growth. The average loan size on a purchase application, at $432,600, was at its lowest since January 2025.”

It’s a much trickier market than those in the past, says Olick. “While purchase mortgage demand has historically trended pretty closely with actual home sales, there are a lot of unusual factors in today’s market. Consumer sentiment is unsteady, and cancellation rates on contracts have been high for both new and existing homes,” she says. “So far, pending sales, which represent signed contracts, have not been rising along with mortgage demand.”

She also reports that mortgage rates began climbing again just before the July Fourth holiday, and are up again this week so far. “It may not, however, be a sign of a stronger move higher.”

It’s not a matter of what goes up must come down, according to Mortgage Daily News’ Matthew Graham. “We often tend to see slightly brisk movement in the opposite direction after experiencing a consistent trend in the other direction. The month of June was arguably such a trend, and it took rates to their lowest levels in several months. Apart from the last few days of June, today’s rates are still the lowest since late April.”

What comes next? Anybody’s ballgame.

Realtor, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are under pressure today. The MBS market worsened by -11 bps last week. This was not enough to increase mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Higher

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Geopolitical, 2) Inflation and 3) Retail Sales.

1) Geopolitical: There are several storylines that are garnering the attention of long bond traders. Ukraine/Russia is once again front and center. Pressure on Powell to step down, and tariffs are also key. With tariffs we had weekend announcements of 30% tariffs on Mexico and the EU.

2) Inflation: When will tariffs show up in inflation data? Last week's Minutes certainly showed that the Fed has been scratching their collective heads over this. This week we will get both CPI and PPI. The bond market will rally if they are lower than expected as the prospect of a Fed rate cut will increase. But, the bond market will sell off if they are higher than expected.

3) Retail Sales: We did not get a good Consumer Credit report last week as it showed a big down turn in credit card charges. But will this translate into lower Retail Sales?

This Week's Potential Volatility: High

This morning markets saw some rocky trading that has left us under pressure. Volatility has started high and will likely stay that way this week.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

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All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

Rates listed herein are for market direction and trends within the industry only. No APR is given and you are not guaranteed any listed rate or any lock period of said rates. Rates are only approved when your application is submitted and locked in by the lender along with all disclosures including APR.