Falling mortgage rates failed to get more homebuyers off the fence last week for the first time in a month. But rates are expected to keep falling on a new report out Wednesday showing there are now more unemployed people than job openings for the first time since the pandemic.
Applications for purchase loans were down by a seasonally adjusted 3 percent last week when compared to the week before, but were still up 17 percent from a year ago, the Mortgage Bankers Association reported.
The MBA’s Weekly Mortgage Applications Survey showed last week’s drop in mortgage rates did spur a few more refinancing requests, with refi applications up 1 percent week over week and 20 percent from a year ago.
“Mortgage rates declined last week, with the 30-year fixed rate decreasing to its lowest level since April,” MBA Deputy Chief Economist Joel Kan said, in a statement. “However, that was not enough to spark more application activity.”
Purchase loan applications pulled back after four consecutive weeks of increased demand, “as slower homebuying activity led to declines in applications across the various loan types,” Kan said.
Demand for conventional purchase loans was down by a seasonally adjusted 3.4 percent, more than the 2.3 percent decline in FHA purchase loans and 1.8 percent dip in VA purchase loans.
Homes are sitting on the market longer in many regions, with houses going under contract in July spending a median of 43 days on the market — the most in a decade. Conditions vary by market, however, with homes still being snapped relatively quickly in the Midwest and parts of the Northeast.
Mortgage rates retreat as economy cools
At 6.49 percent on Friday, rates on 30-year fixed-rate conforming mortgages were approaching a 2025 low of 6.48 percent registered on April 4, according to loan lock data tracked by Optimal Blue.
Mortgage rates had been on the decline this spring, descending from a 2025 high of 7.05 percent seen on Jan. 14 before rebounding on fears that tariffs announced by President Trump in April would revive inflation.
Rates started coming down again at the end of July as the Trump administration postponed some tariffs and announced trade deals with trading partners.
Data showing a slowdown in job creation and hiring has also eased inflation worries. The latest downward move in mortgage rates kicked off on Aug. 22, when Federal Reserve Chair Jerome Powell revealed that policymakers at the central bank are starting to see unemployment as a bigger risk to the U.S. economy than inflation.
The latest Job Openings and Labor Turnover Summary (JOLTS) report from the Bureau of Labor Statistics showed employers were trying to fill 7.181 million job openings in July, down 2 percent from 7.357 million in June.
“The downward trend in job openings is now clearer, after an 80,000 downward revision to June and the 176,000 month-to-month decline in July,” Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs said in a note to clients.
Unemployed outnumber job openings
With the ranks of the unemployed rising by 221,000 from June to July, to 7.236 million, there are now “fewer [job] openings than unemployed people for the first time since COVID,” Tombs noted.
The drop in July job openings was driven by the retail sector, where job openings shrank by 110,000, “which looks like an attempt by businesses to control costs in response to the tariffs,” Tombs said.
Samuel Tombs
“All told then, this report strengthens the case for the [Federal Reserve] to delay no longer and start easing policy from this month’s meeting,” Tombs concluded.
Futures markets tracked by the CME FedWatch tool show investors on Wednesday pricing in a 96 percent chance of a Sept. 17 rate cut, up from 80 percent on Aug. 1.
Futures market investors on Wednesday saw a 43 percent chance the Fed will cut rates three times by the end of the year, by a total of 3/4 of a percentage point, up from 37 percent on Tuesday.
Purchase loan demand is on the rise
Source: Mortgage Bankers Association Weekly Applications Survey.
At 158.7, the MBA’s seasonally adjusted purchase loan applications index was down 12 percent from its 2025 peak of 180.9, registered during the week ending July 4. But the index was up 24 percent from a 2025 low of 127.7 at the start of the year.
If mortgage rates continue to fall, Fannie Mae economists expect sales of existing homes will grow by 11 percent next year, to 4.53 million.
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