The housing market correction continued this week, as the fixed-rate mortgage (FRM) dipped to 6.15% for the week ending January 19, the Mortgage Bankers Association (MBA) reports that overall mortgage app volume rose 7% week-over-week, for the week ending January 20, 2023.
“Borrower demand, thanks to lower mortgage rates, continues to rise in early 2023,” said MBA President and CEO Robert D. Broeksmit. “Mortgage applications increased for the third straight week, with gains in both purchase and refinance activity. Purchase demand is still below year-ago levels, but lower rates and improving affordability are favorable developments for the housing market heading into the spring.”
The MBA’s Refinance Index increased 15% from the previous week, and was 77% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 3% from one week earlier. The unadjusted Purchase Index decreased 1% compared with the previous week, and was 39% lower than the same week one year ago.
“Mortgage rates declined for the third straight week, which is good news for potential homebuyers looking ahead to the spring homebuying season,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Mortgage rates on most loan types decreased last week, and the 30-year fixed rate reached its lowest level since September 2022 at 6.2%.”
The refinance share of mortgage activity increased to 31.9% of total applications, up slightly from 31.2% the previous week. The adjustable-rate mortgage (ARM) share of activity fell to 6.5% of total applications.
“Overall applications increased with both gains in purchase and refinance activity, but purchase applications remained almost 39% lower than a year ago,” added Kan. “Homebuying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market. Many have been waiting for affordability challenges to subside.”
By loan type, the FHA share of total applications decreased to 11.9%, down from 13% the week prior, while the VA share of total applications rose to 13%, up from 11.8% the week prior. The USDA share of total applications remained unchanged at 0.6% from the week prior.
“Despite a 15% increase in refinances, they were still 77% behind last year’s pace, as rates remained more than two percentage points higher, thus providing very little refinance incentive for most borrowers who are locked into lower rates,” added Kan.
Despite the rise in apps and dip in rates, Redfin reports the median U.S. home-sale price increased 0.9% year-over-year to $350,250 during the four weeks ending January 15. Prices remain elevated because buyer activity has begun to pick up.
“The people who started browsing homes online and scheduling house tours at the end of 2022 are now turning into actual homebuyers,” said Redfin Deputy Chief Economist Taylor Marr. “Low competition, falling mortgage rates and seller concessions are bringing some buyers back to the market. That’s helping keep national home prices afloat, which is one bright spot for sellers. But many buyers are still sitting on the sidelines and demand could dip back down if inflation declines slower than expected or mortgage rates rise again.”