Mortgage application activity declined modestly last week despite a drop in rates, according to the Mortgage Bankers Association’s (MBA) latest survey. The Composite Index fell 2.6% on a seasonally adjusted basis for the week ending June 13, with both purchase and refinance activity posting week-over-week declines. “Even with lower average mortgage rates, applications declined over the week as ongoing economic uncertainty weighed on potential homebuyers’ purchase decisions,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. Refinance applications were down 2% from the prior week but remain 25% higher than the same week last year. Purchase applications fell 3% on a seasonally adjusted basis but are still 14% above 2024 levels. These declines come after a brief rebound in early June and underscore the fragile sentiment in the housing market. The average 30-year fixed rate decreased to 6.84%, the lowest level since April, with modest declines across most other loan types as well. Mortgage Rate Summary:

30yr Fixed: 6.84% (−0.09) | Points: 0.66 (+0.02)

15yr Fixed: 6.14% (−0.02) | Points: 0.70 (+0.04)

Jumbo 30yr: 6.81% (−0.12) | Points: 0.63 (no change)

FHA: 6.57% (−0.03) | Points: 0.90 (+0.02)

5/1 ARM: 6.10% (−0.12) | Points: 0.57 (+0.24)

Builder sentiment declined for the second straight month according to the National Association of Homebuilders (NAHB) and Wells Fargo’s latest Housing Market Index (HMI). The headline index dropped two points to 32 in June, marking another step down toward the post-pandemic lows seen in 2023. All three components of the index moved lower:

Current sales conditions fell two points to 35

Sales expectations for the next 6 months dipped to 40

Buyer traffic dropped to 21

Persistent affordability challenges—namely high mortgage rates and tariff-related material costs—remain major headwinds. As builders adapt, many are turning to price cuts and incentives to attract buyers. In fact, the share of builders reporting price reductions climbed to 37% in June, the highest since NAHB began tracking the data monthly in 2022. The average price cut held steady at 5%. Incentives were also widespread, with 62% of builders reporting some form of sales sweetener, up slightly from 61% in May. Despite the gloomy headline, it’s worth noting that the market continues to be highly sensitive to any shift in rate expectations or material costs. As the broader economic picture evolves, builder sentiment may yet rebound—but for now, confidence remains historically low.

With Thursday being a federal holiday, banks (and more importantly, the underlying market for mortgage related bonds) were closed.  This means that lenders were not able to update mortgage rates.  It turns out that it wouldn’t have mattered either way as the average lender has barely budged from Wednesday’s levels.  But let’s not miss an opportunity to deliver news that’s technically good even if only just.  Over the past 3 business days, average rates have fallen 0.05%.  This keeps us close to the lowest levels seen since April 4th with top tier 30yr fixed scenarios at 6.86 on the MND daily rate index. Given some of the news headlines this week, it bears repeating that this week’s Fed announcement has nothing to do with rates holding steady.  In fact, even if the Fed had cut rates (which was not seen as even a remote possibility by financial markets), mortgage rates could just as easily have moved higher.  

The Senate version includes restoration of the mortgage interest deduction, but a tax code revision likely would stifle foreign investment in real estate.

The department’s head pointed out that manufactured housing is the most affordable non-subsidized option for building homes.

Bill Pulte’s social media posts saying inflation has fallen far enough added to intensified political pressure on the independent Federal Reserve chairman.

Previous predictions of a “silver tsunami” that might add essential housing supply are ebbing as senior citizens see benefits of aging in place, Redfin said.

Seven officials now foresee no rate cuts this year, compared with four in March. Two others pointed to one cut this year.

Fed Threads Needle of Apathy

Today marked one of only 4 days of the year with an updated Fed dot plot. When it came out, there was a fairly pitiful volume response relative to other dot plot days and an even more underwhelming level of volatility in the bond market. It wasn’t until almost 45 minutes later that bonds showed actual signs of life in response to Fed Chair Powell saying flat-out that they’ll be able to make a better decision if they wait a couple of months.  But even after that modest bounce in bond yields, we were just barely getting back to unchanged levels on the day.  Bottom line, the Fed easily threaded the needle of bond market apathy–not too surprising given that it’s a wide eye at the moment, but definitely not a given on dot plot day.

Econ Data / Events

Jobless Claims

245k vs 245k f’cast, 250k prev

Continued Claims

1945k vs 1940k f’cast, 1951k prev

Building Permits

1.393m vs 1.430m f’cast

Housing Starts

1.256m vs 1.36m f’cast

Market Movement Recap

09:28 AM Modestly stronger overnight and little-changed after econ data.  MBS up 2 ticks (.06) and 10yr down 1.8bps at 4.366

11:21 AM Slightly friendly lead-off ahead of Fed.  MBS up 6 ticks (.19) and 10yr down 3.3bps at 4.351

02:15 PM Almost no reaction to Fed so far.  MBS up an eighth and 10yr down 1.5bps at 4.369

03:22 PM A bit of weakness during press conference, but leveling off now.  MBS still up 1 tick (.03) and 10yr up less than 1bp at 4.386

It happens, but it’s rare. A Fed “dot plot” day has come and gone with mortgage rates almost perfectly unchanged from the previous day. This speaks to the level of indecision not only in the market, but also among Fed members. First off, what’s a “dot plot day?”  The dot plot (or simply, “the dots”) refers to a chart/table in the Fed’s economic projections that shows where each Fed member sees the Fed Funds Rate at the end of the next few years.  These projections only come out on 4 of the 8 Fed days per year and they’ve grown to be a leading source of volatility for financial markets on those days. Since it was already a foregone conclusion that the Fed would not be cutting rates today, the market was forced to take its Fed-related cues from the dots and from Fed Chair Powell’s press conference. The latter was just slightly negative for rates (i.e. it implied some upward pressure), but the dots did no harm.  After the dust settled, the underlying bond market was flat to slightly stronger on the day due to improvement that was in place several hours before the Fed announcement.  Markets are closed tomorrow for the Juneteenth holiday, but will reopen on Friday.