According to a new report from the Mortgage Bankers Association, or MBA, a drop in mortgage interest rates is spurring demand from homebuyers.
According to seasonally adjusted data, mortgage applications increased by 28% last week compared to the previous week. In addition, the MBA’s refinance index increased 34% from the previous week.
“As we enter the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers,” MBA chief economist and senior vice president Mike Fratantoni said in a statement released on Wednesday.
According to the report, mortgage rates are at their lowest level since September. Last week, the average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances of $726,200 or less was 6.23%, down from 6.42% the previous week.
Despite the gains, the housing market continues to be impacted by the Federal Reserve’s interest rate hikes, which have dampened housing market activity. According to the MBA, purchase volume was 35% lower than the same period last year, and the refinance index was 81% lower than the same week in 2022.
Since 1990, the MBA has conducted a weekly survey that has covered more than 75% of all retail residential mortgage applications in the United States.
The figure is low enough to indicate that more builders consider conditions to be poor (any number greater than 50 indicates that more builders consider conditions to be good), but the four-point increase ends a year-long decline in confidence levels.
“It appears that the low point for builder sentiment in this cycle occurred in December,” NAHB chairman Jerry Konter said in a statement on Wednesday. “The rise in builder sentiment also implies that cycle lows for permits and starts are likely close at hand, and a rebound in home building could begin later in 2023.”