Mortgage demand appears to be stabilizing after recent declines, suggesting that home buyers aren’t finished with the nation’s competitive real-estate market just yet.
The volume of applications for mortgages used to purchase homes increased more than 7% on a weekly basis for the week ending Sept. 10, reaching the highest level since April, according to data released Wednesday by the Mortgage Bankers Association.
An overall index for mortgage application volume edged upward only 0.3%, owing to the continued decline in refinance applications as mortgage rates have steadied in recent weeks.
Compared with a year ago, purchase loan applications were down 11%, the report noted, the smallest decline on an annual basis in 14 weeks. At this point last year, the real-estate market was in the midst of its major pandemic-driven boom in home sales.
Taken on its own, the most recent mortgage application data would suggest a sudden rebound in interest. However, economists cautioned that because last week was a holiday week due to Labor Day, the data could be volatile — though the Mortgage Bankers Association does adjust its data for such seasonal disruptions. And the peculiarities of the pandemic mean that a single week’s worth of data may not be all that indicative of the situation in the broader market.
“We therefore advise taking today’s reported weekly changes with a particularly large grain of salt,” Joshua Shapiro, chief U.S. economist at MFR Inc., said in a research note.
But the long term trend does look favorable. Throughout this year, the limited supply of homes for sale had constrained purchase activity — which caused a downturn in mortgage demand. That decrease deepened as the situation in the market for newly-constructed homes worsened in light of rising prices and labor constraints.
New home sales ‘may be finding a bottom’
“Most recently, though, both mortgage applications for home purchase and new home sales have shown signs of stabilizing, tentatively suggesting that new home sales may be finding a bottom,” Shapiro noted.
On the existing-home side of the market, the number of properties listed for sale has improved throughout the summer. Over the past 24 weeks, there have only been four weeks in which the number of new listings declined, according to data from Realtor.com. At the same time, home price growth has begun moderating, and homes are spending more time on the market.
This is providing an in for buyers who have struggled throughout the COVID-19-fueled real-estate boom. Even though bidding wars are less common these days than they were a few months ago, a majority of homes still see multiple offers, according to Redfin.
But even a slight reduction in competition — and a slight reprieve in the breakneck pace of home price growth — could be enough to lure buyers back into the market who might have opted to sit things out earlier this year.