Concerns Grow as Mortgage Applications Decline Before Spring

Potential homebuyers are finding few incentives to engage with the critical spring housing market, despite the increase in property listings. Interest rates have stabilized recently, yet housing prices continue to climb.

Recent data from the Mortgage Bankers Association reveals a 4% decline in mortgage applications for home purchases over the last week compared to the week before, with no change from the same period last year.

"Since the year's beginning, the average amount borrowed for home loans has risen, reaching $447,300 last week. This is attributed to weaker government-backed purchase activities and is the peak since October 2024," noted Joel Kan, MBA's VP and Deputy Chief Economist.

For a 30-year fixed-rate mortgage with conforming balances up to $766,550, rates dropped to 6.97% from 7.02%, with the points associated increasing to 0.64 from 0.63. These rates include the origination fee for a loan with a 20% down payment and are 17 basis points lower than the same time last year.

"Mortgage rates have slightly fallen, mirroring the decrease in Treasury yields post-FOMC meeting amid a turbulent week for stock markets. The current rate for a 30-year fixed mortgage is the lowest recorded in six weeks," Kan elaborated.

This modest reduction prompted a 12% increase in applications to refinance home loans from the previous week and a 17% rise from the corresponding week of the prior year. Despite significant percentage increases, the high numbers are largely due to historically low volumes. Many borrowers today still hold loans with interest rates well beneath current offers.

Applications for home purchases are down 39% compared to February 2019, prior to the pandemic. Home sales are nearing their lowest in thirty years and national home prices continue to reach unprecedented highs.

Some sellers are opting to lower prices; 15.6% did so in January, a slight increase from last January's 14.7%, according to Realtor.com. Nevertheless, the remaining sellers are finding enough buyer interest to maintain their asking prices.

The inventory of homes for sale has increased by 25% compared to last year, largely because properties are taking longer to sell. According to Redfin, the average sale time in January was 54 days, the longest since March 2020. However, the current stock remains 25% less than that in January 2019.