In This Story
Housing market activity is finally picking up again amid the decline in mortgage rates.
New home sales in August jumped 14.6% to 776,000 from 677,000 in July, the fastest sales pace since February 2022, according to data from the Mortgage Bankers Association published Tuesday. Meanwhile, mortgage applications for new home purchases grew 4.4% last month, in the 19th consecutive month of growth.
“Homebuyers, including a growing share of first-time buyers, continue to favor newly built homes, as declining mortgage rates in August contributed to the uptick in new home sales activity,” Joel Kan, vice president and deputy chief economist of the Mortgage Bankers Association, said in a statement.
Mortgage rates fell for the sixth-straight week last week, hitting their lowest level since February 2023. The popular 30-year fixed mortgage rate fell to 6.29% last week from 6.43% in response to cooling inflation, a slowing job market, and the anticipated first rate cut from the Federal Reserve.
The double-digit monthly uptick in sales is a welcome sign, given recent sluggish mortgage origination and market figures. Last week, the Mortgage Bankers Association’s adjusted purchase index rose just 2% from a week prior, and the unadjusted index was 3% lower than a year prior. Total mortgage loan application volume increased just 1.4% on a seasonally adjusted basis from a year prior.
Kan pointed to affordability challenges and limited inventory as factors that are preventing people from going through with purchases.
Affordability has continued to weigh on potential home buyers, making homeownership largely unattainable for average Americans. In the second quarter of this year, the potential average monthly housing payment was approximately $3,500 — or 49% of the median U.S. income for the first-time buyer age group, according to estimates by NerdWallet (NRDS+0.42%).
And even as mortgage rates are on the decline, housing prices are showing few signs of easing up. The median sale price of a home reaching a whopping $433,229 in August, according to the most recent Redfin (RDFN+0.98%) data available. There were nearly 36% more homes for sale on a typical day in August compared with a year ago — the highest level since May 2020, Realtor.com (NWSA+1.59%) found.
The housing market may remain sticky, however, with most Americans waiting for mortgage rates to drop below 6% (or more) before deciding to move, according to a Bankrate survey. Mortgage rates could continue to drop once the Fed begins its rate cutting campaign, but a sudden rush of activity could continue to push prices up.