Welcome to another edition of the CMRE Market Watch, where we break down the latest trends impacting your mortgage and real estate decisions. This week, the dominant headline continues to be the persistent climb of mortgage rates, which are now firmly above the 7% mark for a 30-year fixed rate. This elevated rate environment is creating a complex, sometimes contradictory, landscape for both buyers and sellers.
The Mortgage Application Rollercoaster: High Rates & The Rise of ARMs
The most immediate impact of rising rates is seen in mortgage application activity. The Mortgage Bankers Association (MBA) reported a further decline in total mortgage application volume, as the 30-year fixed rate hit 7.12% for the week ending September 18, 2026—its highest level since May 2024. This naturally sent refinance demand plummeting, with the Refinance Index dropping another 3% week-over-week and standing a staggering 62% lower than a year ago. In fact, the pace of refinancing is now at its slowest point since February 2025, as few borrowers can benefit from replacing their lower-rate mortgages with today's higher offerings.
Purchase activity, while technically down 1% week-over-week, has shown more resilience, largely grinding sideways for the past few weeks. However, a notable shift is occurring: borrowers are increasingly considering adjustable-rate mortgages (ARMs). ARMs accounted for 9.8% of application volume, up from 8.4% the week prior. The average rate for a 5/1 ARM fell to 6.10%, creating a significant spread of over a full percentage point below the 30-year fixed rate. This makes the adjustable option a compelling alternative for those facing higher fixed rates.
New Homes: A Measured Rebound in a Flat Market
Despite the challenging rate environment, the new home market saw a positive, albeit tempered, bounce in August. Sales of new single-family homes rose 6.4% month-over-month to a seasonally adjusted annual rate of 684,000 units. This increase pushed sales back above the 600,000 mark after July's pullback, though the broader trend for new home sales remains relatively flat over the longer term. Inventory of new houses for sale held steady at 483,000, leading to a slight drop in the implied supply to 8.5 months, down from 9.0 months in July.
Pricing in the new home market was mixed. The median sales price edged up 0.4% from July to $393,700, but it was still 5.8% lower than August 2025. The average sales price, however, fell more sharply, down 9.1% from July and 8.8% from a year earlier to $478,700. It's important to remember that these price movements don't account for potential changes in square footage or location, so an exact “apples to apples” comparison can be tricky.
Existing Homes: A Gentle Nudge Up with Regional Divides
The existing home market also offered a glimmer of positive news, with pending home sales—signed contracts on existing homes—edging higher in August. The National Association of REALTORS® (NAR) Pending Home Sales Index (PHSI) increased 0.3% from July. However, this modest gain still leaves pending sales down 4.7% from a year earlier and roughly 30% below pre-pandemic levels. NAR Chief Economist Lawrence Yun highlighted that while income growth has been outpacing home price growth, higher borrowing costs continue to limit improvement in buying power.
The national increase was driven by regional strength, as gains in the South (+2.3% MoM) and West (+3.0% MoM) offset declines in the Northeast (-4.2% MoM) and Midwest (-1.6% MoM). This divergence underscores the localized nature of the current housing market.
The CMRE Takeaway
The current mortgage and real estate landscape is undeniably complex. We're seeing persistent high mortgage rates redefine borrower strategies, leading to a noticeable surge in ARM interest. While new home sales saw a healthy rebound in August and pending sales nudged up, the overall market remains subdued compared to historical norms, particularly for existing homes. For those navigating this market, understanding these nuances – from rate fluctuations to regional performance – is key to making informed decisions. Stay tuned to CMRE for more expert insights!