Mortgage loan application volume increased again last week, continuing a trend of rising demand as mortgage rates slip.
The Mortgage Bankers Association’s weekly survey showed the adjusted Market Composite Index, a measure of mortgage loan application volume, rose by 7%.
The results included an adjustment for Martin Luther King, Jr. Day.
Refinances drove the increase, up 15% from the week prior as mortgage rates fell to 6.2%, their lowest level since September.
They remain 77% lower than the same time last year, however, comprising only 31.9% of total applications. In the past decade, refis averaged 58% of total activity.
Purchase demand saw a boost as well, though not as drastic. Applications increased at a seasonally adjusted rate of 3%, but the unadjusted index fell by 1%. Purchase applications are down by nearly 39% YOY.
“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.
Though experts are careful to warn that volatility is likely in 2023, some say rates have likely peaked and should drop further.
The Mortgage Bankers Association expects rates to finish the year at 5.2%.
“Homebuying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market. Many have been waiting for affordability challenges to subside,” Kan added.
While appreciation is moderating, home prices are still climbing. The median price for an existing home was $366,900 in December, an increase of 2.3% YOY but down slightly from November. Home prices are now 0.7% below their June peak, data from Zillow shows.
Limited inventory has kept prices elevated and is expected to continue through 2023.
Other key findings include:
The ARM share of activity fell from 6.6% to 6.5% of all applications.
The FHA share of total applications dipped from 13% to 11.9%, with an average interest rate of 6.22%.
The VA share rose from 11.8%% to 13%, and the USDA share remained unchanged at 0.6%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances decreased from 6.08% to 5.92%, and for 5/1 ARMs rose from 5.31% to 5.44%.
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