“Purchase application demand has weakened recently, but housing affordability is more favorable and housing inventory continues to rise, thus the backdrop for prospective homebuyers is modestly improving,” Sam Khater, chief economist at Freddie Mac in McLean, Virginia.
Geopolitics override an encouraging inflation signal
An otherwise promising week for rate watchers was quickly overtaken by events in the Middle East. The Consumer Price Index showed headline inflation cooling to 3.5% and core inflation easing to 2.6%, according to the Bureau of Labor Statistics, a reading that briefly raised hopes for a pullback in borrowing costs.
Those hopes did not survive the week. American and Iranian forces continued exchanging airstrikes over control of the Strait of Hormuz, driving crude oil prices and Treasury yields sharply higher.
The 10-year Treasury yield — which lenders use as a primary benchmark when pricing fixed-rate home loans — stood at 4.57% at midday Thursday. That’s up from 4.54% the prior week and well above the 3.97% level recorded in late February before the conflict began.