The numbers: U.S. mortgage applications dropped as home buyers continue to struggle with low inventory, offsetting the impact of falling rates.
Mortgage rates are relatively lower yet that did not boost home-buying and refinancing demand in recent weeks. The overall market composite index — a measure of mortgage application volume — decreased in the last two weeks, according to the Mortgage Bankers Association (MBA) said on Wednesday.
The market index fell 9.4% to 173.5 for the week ending December 29 from two weeks earlier. A year ago, the index stood at 184.5.
Key details: Home-buying and refinancing activity fell even though rates are relatively lower than the last six months.
Buyer demand decreased as buyers struggled to find homes for sale. The purchase index — which measures mortgage applications for the purchase of a home — fell 5% from two weeks ago.
Refinancing activity also dropped, as homeowners held off on doing so.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 6.76% for the week ending December 29. That’s up from 6.71% from the week before.
The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 6.86%, up from 6.85% the previous week.
The average rate for a 30-year mortgage backed by the Federal Housing Administration was up to 6.51% from 6.5%.
The 15-year fell to 6.26% from 6.41% from the previous week.
The rate for adjustable-rate mortgages fell to 5.71% from last week’s 6.26%.
The big picture: Despite a fall in rates, the housing market’s recovery will be held back by the number of homes for sale. Since the resale market has formed the vast majority of for-sale listings, until homeowners with low rates feel like selling, the market remains frozen for now.
What the MBA said: “Markets continued to digest the impact of slowing inflation and potential rate cuts from the Federal Reserve, helping mortgage rates to stay at levels close to the lowest since mid-2023,” Joel Kan, vice president and deputy chief economist at the MBA, said in a statement.+
“The recent decline in rates has given the housing market some cause for optimism going into 2024,” he added, “but purchase applications have not yet picked up in response, with the overall level of purchase activity 12 percent lower than a year ago.”
Market reaction: The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was below 4% in early morning trading Wednesday.
