Mortgage Rates

House consumers are making use of for mortgages on the highest charge since April — what does that say in regards to the housing market?


Mortgage demand appears to be stabilizing after the recent declines, suggesting that homebuyers are not yet done with the country’s competitive real estate market.

The volume of home purchase mortgage applications rose more than 7% on a weekly basis in the week ending September 10, hitting its highest level since April, according to data released Wednesday by the Mortgage Bankers Association.

An overall index for the volume of mortgage applications rose by only 0.3% due to the continuing decline in refinancing applications due to the stabilization of mortgage interest rates in recent weeks.

Compared to last year, purchase loan applications were down 11%, the report said, the smallest annual decline in 14 weeks. At this point last year, the real estate market was in the midst of its major pandemic-induced boom in home sales.

Taken alone, the latest mortgage application data would indicate a sudden rebound in interest. However, economists warned that the data could be volatile as the last week was a holiday week due to Labor Day – although the Mortgage Bankers Association adjusts its data for such seasonal disruptions. And the specifics of the pandemic mean that a single week’s data may not be too meaningful for the situation in the broader market.

“We therefore recommend taking the weekly changes reported today with a particularly large grain of salt,” said Joshua Shapiro, US chief economist at MFR Inc., in a research note.

But the long-term trend looks favorable. Throughout the year, the limited supply of homes for sale had constrained buying activity – which led to a decline in mortgage demand. This decline was exacerbated as the situation in the newly built home market deteriorated amid rising prices and labor shortages.

New Home Sales ‘May Hit Bottom’

“Recently, however, both home-purchase mortgage applications and new home sales have shown signs of stabilization, suggesting, for now, that new home sales may bottom,” noted Shapiro.

On the existing property side, the number of properties for sale has improved over the summer. In the past 24 weeks, there have only been four weeks in which the number of new ads has declined, according to data. At the same time, home price growth has slowed and homes are spending more time in the market.

This offers a chance for buyers struggling during the COVID-19 fueled housing boom. Although bidding wars are less common now than they were a few months ago, the majority of households are still seeing multiple offers, according to Redfin. RDFN, +1.11%

But even a slight decrease in competition – and a slight calming of the breakneck rise in home prices – could be enough to lure back buyers who might have decided to take things out earlier this year.