According to a new report from the Mortgage Bankers Association, 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. The refinance index of the Bankers Association 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,” Mortgage Bankers Association 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 bankers association, purchase volume remained 35% lower than the same period last year, and the refinance index was 81% lower than the same week in 2022.
Since 1990, the bankers association has conducted a weekly survey that has covered more than 75% of all retail residential mortgage applications in the United States.
Also on Wednesday, the National Association of Home Builders reported that builder confidence in newly constructed single-family homes increased to 35 in January, owing to “a modest drop in interest rates.”
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 was registered in December,” said National Association of Home Builders Chairman Jerry Konter in a statement issued 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.”