Potential buyers may soon return to the market if rates continue to fall and home prices cool further
The US mortgage market continues to see improvement in application volume as interest rates declined for the third consecutive week.
Mortgage applications rose 7% on a seasonally adjusted basis – up 1% when unadjusted – for the week ending January 20, according to the Mortgage Bankers Association. Refinance applications jumped 15% from the previous week, and purchase applications increased by 3%.
“Mortgage rates declined for the third straight week, which is good news for potential homebuyers looking ahead to the spring homebuying season,” said Joel Kan, MBA’s vice president and deputy chief economist. “Mortgage rates on most loan types decreased last week, and the 30-year fixed rate reached its lowest level since September 2022 at 6.2%.
“Overall applications increased with both gains in purchase and refinance activity, but purchase applications remained almost 39% lower than a year ago. Despite a 15% increase in refinances, they were still 77% behind last year’s pace, as rates remained more than two percentage points higher, thus providing very little refinance incentive for most borrowers who are locked into lower rates.”
While homebuying activity remains tepid compared to last year, Kan expects to see potential buyers come back into the market if rates continue to fall and home prices cool further. “Many have been waiting for affordability challenges to subside,” he said.
According to the National Association of Realtors, the median existing-home price for all housing types in December was $366,900 – a 2.3% increase from $358,800 in December 2021.
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