Signs of a “late spring housing market slowdown” emerged in June as U.S. home prices fell for the first time this year and fixed interest rates for purchase mortgages fell 8% from a year ago.
That's a key takeaway from Optimal Blue's June 2024 Market Advantage Report, released Wednesday. The report, which covers the 20 largest U.S. metropolitan areas, found that the average home purchase price in June was $478,800, down about $1,500 compared to May. Given the fewer productive days in June, lockdown loan volume (including purchases and refinances) increased 2% month-over-month.
“Despite improving interest rates, purchasing activity was weak in June,” Brennan O'Connell, director of data solutions at Optimal Blue, said in a statement. “However, homeowners with higher interest rates, especially those who paid off their mortgage within the past 12 to 18 months, jumped at the opportunity to refinance if it meant a small reduction in their monthly payments.”
“This behavior speaks to the inventory and purchasing ability challenges consumers currently face. As we look to the second half of 2024 and possible interest rate easing by the Fed, the purchase lock count provides insight into whether and when production may turn around.”
Optimal Blue noted that refinancing increased significantly as the 30-year conforming loan rate fell to 6.938% at the end of June. Rate and term refinances increased 39% from May to June, while cash-out refinances increased 11% for the month. Average loan size decreased slightly in June to $374,200.
Most metro areas analyzed saw double-digit declines in fixed loan volume that month, although cities like Boston (-4.7%), Baltimore (-5.7%), Los Angeles (-7%) and San Francisco (-7.3%) saw less dramatic declines.
Last month, conforming loans accounted for 55.9% of all loans, but that share declined by 2.5 percentage points compared to June 2023. The market share of non-conforming loans and U.S. Department of Veterans Affairs (VA) loans increased to 13.5% and 11.7%, respectively, over the past year.
Over the past year, disbursement rates (the percentage of locked loans that are actually disbursed) have followed a different path: Lenders recorded an 82% unlock rate for purchase loan locks in June, up 140 basis points from the same month in 2023. However, only 58.5% of locked refinances were actually disbursed, down 467 basis points over the past year.