Mortgage applications fell sharply last week as higher borrowing costs continued to pressure refinance demand, while purchase activity showed a bit more resilience. The Mortgage Bankers Association (MBA) reported an 8.5% decrease in total application volume on a seasonally adjusted basis for the week ending May 22. The decline was driven largely by a steep drop in refinance activity. The Refinance Index fell 18% from the previous week, though refinance demand remained 19% higher than the same period one year ago. Purchase activity held relatively steady despite the rate environment. The seasonally adjusted Purchase Index slipped just 0.4% week over week and remained 5% above year-ago levels. The average 30-year fixed mortgage rate increased to 6.65% from 6.56%, reaching its highest level since August 2025. MBA’s Joel Kan notes the steady climb in rates over the past five weeks pushed many borrowers out of the refinance market. Additionally, Kan said refinance activity weakened across nearly every category last week, noting that “conventional refinances were down 14 percent, along with an 18 percent decrease for FHA applications and a 34 percent decrease for VA applications.” He added that refinances accounted for just 37.5% of total mortgage activity, “the lowest share since June 2025.” Looking ahead to next week’s data, it wouldn’t be a surprise to see a rebound given the relatively strong recovery in mortgage rates (now at their lowest daily levels in more than 2 weeks).

New home sales pulled back in April after stronger readings in the prior two months. According to the latest Census Bureau and HUD data, sales of new single-family homes fell to a seasonally adjusted annual rate of 622,000 , down 6.2% from March and 11.3% from a year earlier. Inventory moved slightly higher, with the number of new homes for sale rising to 489,000 , up 1.7% from March but still 2.2% below April 2025 levels. At the current sales pace, that left months’ supply at 9.4 months , up from 8.7 months in March and 8.6 months one year ago. Pricing was mixed. The median sales price climbed to $422,500 , up 8.0% from March and 2.2% from a year earlier. The average sales price ticked up to $508,800 , a modest 0.7% monthly gain, though it remained 1.1% below last year’s level.
Sales (MoM): -6.2%
Sales (YoY): -11.3%
Inventory (MoM): +1.7%
Inventory (YoY): -2.2%
Months’ Supply: 9.4 (up from 8.7 prior month; 8.6 YoY)
Median Price: $422,500
Average Price: $508,800

Home price appreciation slowed further in March and through the first quarter of 2026, according to the latest data from both FHFA and the S&P Cotality Case-Shiller Home Price Indices. While national prices continued to edge higher on a nominal basis, both reports pointed to a housing market struggling to maintain momentum as affordability pressures and elevated mortgage rates continued to weigh on demand. FHFA reported that U.S. house prices rose 1.7% year-over-year in the first quarter of 2026, matching the prior quarter’s annual pace. On a quarterly basis, prices increased 0.5% from Q4 2025, while the agency’s seasonally adjusted monthly index posted a modest 0.1% gain in March from February. Regional FHFA data continued to show a sharply divided housing market. Seven of the nine census divisions posted annual price gains, led by the East North Central division at +4.4% . By contrast, the West South Central division recorded a 0.7% decline . At the state level, Illinois led annual appreciation at 7.3% , while Colorado posted the steepest decline at -2.4% . Metro-level results reflected similar divergence. FHFA said home prices increased in 65 of the 100 largest metropolitan areas over the past year, with Elgin, Illinois posting the strongest appreciation at 10.8% . Meanwhile, Austin-Round Rock-San Marcos, Texas recorded the largest decline at -6.9% , underscoring ongoing softness across portions of the Sun Belt.

This is the fourth settlement MV Realty reached in the last two months over its controversial homeownership benefits program, which is now illegal in 33 states.

The Canadian-American bank’s first AI agent does the work of gathering any missing documents and verifying data for mortgage applications.

Deephaven expanded its HELOC product for wholesale lenders, Attom launched an AVM model and First American added an AI assistant to its title platform.

A report from the Financial Stability Board said limited transparency in the private credit market makes it difficult for regulators to monitor and understand risks, potentially masking challenges to the financial system.

Mortgage payments climbed to a 10-month high in April as rates rose, but strong annual wage growth of 5.3% helped keep the MBA’s affordability index nearly flat month to month.

Spoiler Alert: Yes, It Was War Headlines

Need a way to explain overnight weakness in the bond market? War headlines. Need to know why bonds rallied sharply just after 10am ET to hit the best levels in 2 weeks? Yep, more war headlines. Granted, the 8:30am econ data was not completely ignored. A slightly softer-than-expected PCE inflation number helped bonds get back to unchanged levels, but a substantial majority of the day’s volume followed the 10am news that essentially suggested the peace deal was approved, pending Trump’s final sign off. Later in the day, separate newswires suggested Iran hadn’t fully signed off, but no one seemed to care. Day over day gains were mild in the bigger picture, but resulted in the best trading levels in 2 weeks by the 3pm close. 

Econ Data / Events

Continued Claims (May)/16

1786.0K vs 1780K f’cast, 1782K prev

Core CapEx (Apr)

-1.1% vs 0.4% f’cast, 3.4% prev

Core PCE (m/m) (Apr)

0.2% vs 0.3% f’cast, 0.3% prev

Core PCE (y/y) (Apr)

3.3% vs 3.3% f’cast, 3.2% prev

Core PCE Prices QoQQ1

4.4% vs 4.3% f’cast, 2.7% prev

Corporate profitsQ1

-0.4% vs 5.7% f’cast, 5.7% prev

Durable goods (Apr)

7.9% vs 3.5% f’cast, 0.8% prev

GDPQ1

1.6% vs 2.0% f’cast, 0.5% prev

GDP Final SalesQ1

1.5% vs 1.6% f’cast, 0.3% prev

Jobless Claims (May)/23

215.0K vs 211K f’cast, 209K prev

PCE (y/y) (Apr)

3.8% vs 3.8% f’cast, 3.5% prev

PCE prices (m/m) (Apr)

0.4% vs 0.5% f’cast, 0.7% prev

Market Movement Recap

08:19 AM Weaker overnight on reports of ongoing hostilities in Iran. MBS down over an eighth of a point and 10yr up 2.3bps at 4.507

09:17 AM Back near unchanged after data-driven rally. MBS down 1 tick (.03) and 10yr down half a bp at 4.479

10:59 AM quick rally on “deal” reports and a bit of pull back on “yeah but” reports. MBS up 2 ticks (.06) and 10yr down 2.4bps at 4.46

01:02 PM Near best levels. MBS up 5 ticks (.16) and 10yr down 3.4bps at 4.45

There’s a supertanker load of data this morning with some apparently interesting results, but the market remains focused primarily on supertankers being able to transport oil. Those prospects were dealt a fresh blow overnight as both sides reported renewed attacks. Bond yields and oil prices jumped clearly in response, but not in an overly aggressive fashion. And to be fair to this morning’s data, it has actually been up to the task of helping yields drop about 2bps back to unchanged levels. Primary credit would have to go to lower than expected monthly PCE prices. Even though PCE is trending in the wrong direction, the monthly rate came in at 0.4 vs 0.5 forecasts and 0.7 previously.

Any time PCE comes out, there’s some buzz on the implications of earnings versus inflation. This time around, the temptation is to conclude that lower personal income cannot support inflation-adjusted spending. And while there’s no doubt that lower income inhibits spending that would otherwise be seen, longer term data and bigger-picture numbers suggest we shouldn’t count on it as some mythical inflation-fighting hero.