Mortgage Rates Drop, MBA Reports Surge in Refinances; Labor Market Sees Mixed Signals as Jobless Claims Fall: Portafolio Capital Markets Recap for Week Ending 8/9/2024
Mortgage Rates Hit New Lows, Sparking Surge in Refinance Applications While Homebuyer Activity Remains Tepid
Mortgage applications rose by 6.9% last week, marking the highest level since January 2024, as interest rates dropped to their lowest since May, according to the Mortgage Bankers Association. The decline in rates, driven by dovish signals from the Federal Reserve and a weak jobs report, led to a 16% surge in refinancing applications, particularly among VA loans, which reached their highest levels in two years. Despite the overall increase in mortgage activity, purchase applications saw only a slight 1% rise and remained 11% lower than the same week a year ago.
The average rate for a 30-year fixed mortgage fell to 6.55%, with jumbo loans seeing a drop to 6.77%. FHA-backed loans also saw reduced rates, down to 6.49%, while the rate for 15-year fixed mortgages decreased to 6.03%. The adjustable-rate mortgage (ARM) share of applications also increased, reflecting growing interest in more flexible loan options amidst economic uncertainty. However, potential homebuyers appear to be cautious, likely waiting for further rate reductions and more favorable market conditions, even as inventory levels begin to rise in certain areas.
The full press release by the Mortage Bankers Association (MBA) can be found here.
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Jobless Claims Decline, But Labor Market Uncertainty Lingers as Continuing Claims Rise
Initial jobless claims fell by 17,000 to 233,000 for the week ending August 3, according to the Labor Department, defying expectations of a weakening labor market and coming in below the anticipated 240,000. This drop follows a revised increase in the previous week’s claims, which were adjusted up to 250,000. Despite the encouraging drop in new claims, the four-week moving average, a more stable indicator, edged up to 240,750, the highest in nearly a year. Continuing unemployment claims also rose to 1.875 million, the highest since November 2021, signaling persistent challenges in the labor market. The insured unemployment rate remained steady at 1.2%, but the increase in both the moving average and continuing claims adds to concerns about underlying economic weaknesses. Wall Street reacted positively to the drop in initial claims, but market volatility persists as traders now expect the Federal Reserve to cut interest rates in response to the mixed labor market signals and broader economic uncertainties.
The full press release by the US Dept. of Labor can be found here.
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