A Philadelphia broker says life circumstances rather than rate timing keep spring and summer the busiest homebuying months
Inflation posted its sharpest monthly decline in more than six years in June, but few in the mortgage industry are holding out hopes for big Federal Reserve interest rate cuts anytime soon.
The 12-month consumer price index slipped to 3.5% last month, the Bureau of Labor Statistics (BLS) revealed this week – but 10-year US Treasury yields, a key driver of average 30-year fixed mortgage rates, crept higher yesterday afternoon after sliding earlier in the day.
And those average mortgage rates were also on the rise last week, according to the Mortgage Bankers Association (MBA). The 30-year fixed rate has increased to 6.65%, the association’s vice president and deputy chief economist Joel Kan said this morning, marking its highest level for nearly a year.
Rates have ticked steadily higher since the beginning of the year, but some mortgage brokers say activity is driven more by seasonal trends than rate fluctuations.
Yury Shraybman (pictured top), founder and team lead of Innovative Mortgage Brokers in Philadelphia, told Mortgage Professional America the seasonal split this year was as apparent as ever.
“In my area, comparing the beginning of the year to where we are now is almost like comparing apples to oranges,” he said. “Buyer activity here is typically much stronger in the spring and summer and much slower during the winter months.”
Why some buyers simply ignore rate volatility
Rate swings might convince some buyers to move onto or step away from the sidelines, but others have to make a move no matter what – meaning they’re unlikely to set much store on whether rates are sitting at 6% or 6.5%, Shraybman suggested.
“From my experience, most buyers make a move because of life events such as marriage, children, school districts, job changes, or simply needing more space,” he said.
“Because those decisions are driven more by timing and personal circumstances than by trying to perfectly time interest rates, spring and summer are typically the busiest homebuying seasons in my area – and that remains true this year as well. Even with rates still elevated, activity has remained strong.”
The US-Iran war, which began at the end of February, has been one of the major factors driving mortgage rates upwards in recent months. Financial markets reacted positively to an apparent détente between the two sides last month, although rates (and oil prices) face an uncertain future with hostilities ramping up again in the past week.
Shraybman, though, doesn’t see a potential further jump in mortgage rates pouring cold water over the summer market in his area.
“When someone is buying because of a major life event, they’re usually less focused on small shifts in interest rates and more focused on the home itself, the monthly payment, and getting settled,” he said.
Another dynamic he often raises with clients: falling rates tend to draw sidelined buyers back to the market and push prices higher.
“I try to explain to clients that when rates come down, prices often go up because more buyers who have been waiting on the sidelines jump back into the market,” he said, “which increases competition.”
Where will mortgage rates go next?
For those buyers fixated on the rate outlook, there’s no sign that mortgage borrowing costs are set to see a big drop anytime soon.
New Federal Reserve chair Kevin Warsh has been clear that getting policy right remains the central bank’s overriding objective, and in testimony before Congress this week he pledged to rid Americans of what he described as an inflation “tax”.
That suggests rate cuts are not on Warsh’s agenda, at least not this year. But Shraybman said rate volatility does little to change his overall advice to clients.
“As far as the interest rate outlook, I certainly hope rates come down in the near future,” he said. “However, I personally try not to focus too much on predicting rates, since it’s not something any of us can control, and I advise my clients to take the same approach.
“If rates come down later, they can also refinance. But if they wait to buy, they may end up paying more for the home because of increased competition.”
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