M
ortgage rates have fallen in the wake of a weak July jobs report, sparking hopes that the Federal Reserve will cut short-term interest rates in September. However, inflation remains a concern, with producer prices rising more than expected. Despite this, economists believe a fall market rally is still possible.

    Key points:

    * The 30-year fixed-rate mortgage averaged 6.58% this week, its lowest level since late October 2024.

    * A weak jobs report and mixed inflation data led to hopes of a rate cut in September, but the latest producer price data has tempered those expectations.

    * Refinance applications have surged as rates fall, with the Mortgage Bankers Association reporting a 23% increase in refinance activity week-over-week.

    * However, purchase applications remain sluggish, with only a 1% increase week-over-week.

    Economists say that while lower mortgage rates may not be enough to motivate buyers amid inflation concerns, a fall market rally is still possible. Some markets with more inventory and room for negotiation could see an uptick in buyer activity, particularly among higher-income buyers who are feeling economically secure.

    Refinance applications have surged as rates fall, but purchase applications remain sluggish. The recent drop in mortgage rates has prompted homeowners to refinance their loans, but it remains to be seen whether the downward trend will tempt potential buyers into action.

    Inventory growth has slowed and may already be starting its seasonal downward trend, with new listings ticking down. Sellers are holding back until conditions become more favorable, according to Mike Simonsen, chief economist at Compass.