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July’s pipeline data showed mortgage rate-lock activity fell for the second consecutive month, falling 7% month over month, according to Black Knight’s latest Originations Market Monitor report. The Originations Market Monitor provides origination metrics for the U.S. and the top 20 metropolitan statistical areas by share of total origination volume.

"While they moved around a bit in July, there was no escaping the fact that conforming 30-year rates topped 7% in July for the first time since they spiked last fall," says Andy Walden, vice president of enterprise research and strategy at Black Knight. "On both a practical and psychological level, that put further downward pressure on mortgage demand. Purchase loans continue to dominate the origination pipeline, but current housing market dynamics are just not conducive to boosting home buyer origination volumes."

Accounting for 88% of all July activity, purchase locks fell 7.4% from June. According to the report, longer term, purchase lock numbers are down 27% year over year and 35% down compared with 2019 pre-pandemic as higher interest rates and persisting low inventories hinder demand. Adjustable-rate mortgages declined to 6.79% of July's rate-lock activity, as rates for such products became less competitive against fixed products.

Hovering near 60% below July 2022, cash-out refinances declined 5.4% last month. Rate or term refinances increased by 1.9% in July but remained down more than 31% year over year; July 2022 itself had marked a 93% year-over-year decline, Black Knight notes. As just 3% of existing mortgage holders have first-lien rates at or above today's levels, locks on such products will likely remain constrained for some time.

"With home prices hitting new peaks across many parts of the country, and no end in sight to the for-sale inventory shortage, the housing market continues to reheat," Walden continues. "It's worth noting, however, that—in a "normal" year—June typically marks the calendar peak of home prices on a non-adjusted basis, so you would normally expect to see a decreasing trend through year's end and into February. That said, this year, and this market, have been anything but normal. Rising rates may be tamping demand for homes at such record high prices, as evidenced by rate-lock activity, but they've still yet to overcome an even greater deficit of supply. As a result, the purchase market is in a stalemate."

Moving past the historically typical June pricing peak, the average purchase price edged lower to $456,000, with an average loan amount of $358,000 in July. According to the data, the average credit score among primary residence purchase locks hit a record high in the first week of July before edging modestly lower to remain flat in July.