As we approach the end of 2024, the mortgage market continues to show some interesting movements, with higher rates, increased refinance demand, and evolving job and inflation metrics shaping the housing landscape. Here’s a quick breakdown of what’s happening:

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Mortgage Rates and Applications: What’s Trending?

• Mortgage Rates: Rates edged higher last week, adding some pressure to buyers in an already challenging affordability climate.
• Applications on the Rise: Total mortgage application submissions increased by 5.4% during the week ending December 6. This uptick was driven largely by refinance activity, which saw a 27% surge—the third consecutive week of growth. Compared to the same week in 2023, refinance activity is now 42% higher.
• Purchase Index: On the other hand, the seasonally adjusted Purchase Index dropped by 4%, a sign that homebuying activity may be slowing in the face of higher rates.

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The Economic Backdrop: Inflation and Employment

• Inflation Steady: The Consumer Price Index (CPI) held steady at 0.3% for November, aligning with expectations. On an annual basis, inflation was measured at 3.3%, signaling stability as we move into the new year.
• Jobless Claims Rise: Continuing jobless claims jumped by 15,000 to a total of 1,886,000 for the week ending November 30, exceeding predictions. Similarly, initial jobless claims rose by 17,000, reaching 242,000, contrasting with the expected decrease. These figures highlight some softening in the labor market.

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What Does This Mean for Housing?

The rise in refinance applications suggests that homeowners are seizing opportunities to improve their financial positions as rates fluctuate. Meanwhile, the pullback in purchase applications may be temporary as buyers navigate the affordability challenge and wait for market conditions to stabilize.

Economic indicators like steady inflation and a cooling job market could be precursors to relief in the mortgage space. These factors, combined with a projected housing market rebound in 2025, hint that the current landscape may be nearing a bottom.

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What does this mean?

As we head into the final weeks of 2024, all eyes are on interest rates, inflation, and economic signals. The interplay between commercial and residential markets could also set the stage for increased demand, particularly as Austin continues to attract job growth and investment.

For Buyers who know they want to buy but are waiting – there is more certainty in the present moment than in future projections. There is no guarantee that inflation will remain low, and rates may fall below 6%. As a result, most buyers will be close enough to an affordable price and rate and could even use the current weak demand to their advantage.

Sellers looking to seller in Austin may want to wait, by contrast. There is more to be gained by waiting for spring (about March or April) to sell a house simply because of seasonal patterns that seem to be prevalent regardless of economic winds. Still, be reasonable with your price expectations because the homes that are selling are still selling within 10% of their ask price on average. Sellers are still needing to negotiate but they are getting homes sold.

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