Mortgage rates fell to a four-week low, driving a 1.8% increase in total mortgage applications last week, according to the Mortgage Bankers Association (MBA). The average rate for a 30-year fixed mortgage dropped to 6.42% from 6.51%, with refinancing applications surging 5% weekly and 15% year-over-year. However, purchase applications declined 1% weekly and 3% annually, reflecting persistent economic uncertainty among homebuyers.
Geopolitical Factors Influence Rates
The decline in mortgage rates was attributed to volatility in oil prices tied to the Iran conflict, which has driven swings in bond yields. Joel Kan, an MBA economist, noted that the evolving Middle East situation impacted energy and commodity prices, leading to lower rates. Matthew Graham, COO of Mortgage News Daily, emphasized that the Iran war remains the primary driver of market movements, with oil prices serving as the best indicator for bond yields and interest rates.
Regional Market Impact in Los Angeles
In Los Angeles, the housing market has been particularly affected by geopolitical tensions. The Iran war initially spiked mortgage rates, freezing buyer activity, but a ceasefire deal in April brought rates back down. Despite this, homebuyers like Katie Davis remain hesitant, as affordability margins are razor-thin in Southern California’s expensive market. Zillow reported the lowest monthly home sales in three years for L.A. County in January, with homes spending a median of 80 days on the market in February—the longest in five years. Additionally, 17.6% of listings had price cuts, up 1.4 percentage points year-over-year.
National Trends and Buyer Hesitation
Nationally, there is a growing gap between sellers and buyers, with 630,000 more sellers than buyers in the active U.S. market, according to Redfin. This trend mirrors the subdued purchase activity seen in the latest MBA data, where applications remained below last year’s levels for the second consecutive week. Economic uncertainty continues to keep potential homebuyers on the sidelines, despite the recent dip in mortgage rates.