Despite the high mortgage rates in the United States, there was an unexpected surge in mortgage applications last week. Data released by the Mortgage Bankers Association (MBA) on Wednesday, November 26, showed that for the week ending November 21, the U.S. purchase mortgage application index jumped by 7.6% to reach 181.6, hitting a new high since early 2023.
This increase highlights that some buyers are re-entering the market seeking opportunities to purchase a home amidst gradual declines in interest rates and adjustments in housing prices.
MBA noted that the contract interest rate for a 30-year fixed-rate mortgage slightly rose to 6.4%, reaching a new high in over a month. Although mortgage rates remain high, some buyers anticipate further policy adjustments by the Federal Reserve in the coming months, coupled with an increase in housing inventory, prompting them to act early to avoid missing out on bargaining advantages or improvements in supply.
Analysts suggest that the recent trend in home purchase applications may indicate that the housing market is moving away from the sluggish phase seen towards the end of summer. However, due to fluctuations in transaction activities around the Thanksgiving holiday, analysts caution that this week’s data may be subject to seasonal disturbances, with the housing market performance in the following weeks carrying more reference value.
On the other hand, refinancing demand remains weak. MBA’s refinancing index dropped to its lowest level since early September, indicating that current interest rates are not low enough to attract a large number of mortgage holders to refinance their loans. Many homeowners who locked in mortgages at extremely low rates in recent years lack motivation to refinance.
Looking at the broader housing market, since the U.S. housing market entered a period of high interest rates at the end of 2022, transaction volume has remained low for an extended period. Although signs of interest rate peaks, slowing price increases, and inventory recovery have emerged in the market since the second half of this year, there still exists a gap between the expectations of buyers and sellers. Some buyers anticipate a continued decrease in interest rates, while many sellers adhere to the high-price mentality formed during the pandemic, leading to a slow pace of market recovery.
MBA has been conducting this survey weekly since 1990, with data collected from mortgage banks, commercial banks, and savings institutions. These data cover over 75% of U.S. retail residential mortgage applications. Therefore, changes in purchase and refinancing applications are often seen as leading indicators of the housing market’s prosperity.
This surge in mortgage applications signals a positive message for the market. However, experts believe that for the housing market to truly regain momentum, it still depends on a steady decrease in interest rates, income growth, and a more balanced supply and demand relationship. In the short term, the market will closely monitor the next steps of the Federal Reserve and the seasonal changes in home purchases at year-end to assess whether this surge in applications is sustainable.