More homebuyers applied for mortgage loans to purchase homes following a dip in interest rates, according to the Mortgage Bankers Association (MBA).
Overall mortgage loan application volume, including applications for buying homes and refinancing, rose by 6.3 percent for the week ending Nov. 22 from the previous week, according to a Nov. 27 statement from MBA. The jump is the highest increase since late September. Applications to purchase a home saw a 12 percent jump.
“Purchase activity drove overall applications higher last week, as conventional purchase applications picked up pace and mortgage rates declined for the first time in over two months, with the 30-year fixed rate dropping slightly to 6.86 percent,” said MBA Deputy Chief Economist Joel Kan.
Conventional mortgages are home loans taken via private lenders such as banks and credit unions and not backed by a government entity. Such loans usually have stricter qualification requirements such as higher credit scores.
“With the growth in for-sale inventory and signs that the economy remains strong, buyers have remained in the market even though rates have increased recently. The increase in conventional purchase applications helped push the average purchase loan size to $439,200, its highest level in almost a month,” the statement said.
The weekly average rate for a 30-year fixed-rate mortgage bottomed out in late September, following which it was on a steady uptrend.
Rates have been plateauing over the past few weeks, which could be attributed to the markets awaiting more clarity about economic policies, Sam Khater, chief economist at Freddie Mac, said in a Nov. 27 statement.
“Potential homebuyers are also waiting on the sidelines, causing demand to be lackluster. Despite the low sales activity, inventory has only modestly improved and remains dramatically undersupplied,” he said.
Lisa Sturtevant, chief economist at real estate data company Bright MLS, said that estimating rates through the end of the year is now a difficult task, according to a Nov. 27 commentary.
She pointed out that key economic data, such as those about inflation and employment, are scheduled to be released over the next couple of weeks, which could provide clues on the trajectory of mortgage rates.
“If the labor market eases and inflation rises, the Fed could be forced to hold off on rate cuts, leading to mortgage rates remaining higher for longer,” Sturtevant said.
“Alternatively, a steady labor market and declining inflation could point to a rate cut when the Fed meets the week before Christmas and home buyers could see mortgage rates fall in December.”
Investor Demand, 2025 Home Prices
Home purchases by real estate investors have also plateaued, according to a recent report from Redfin. Investors bought 2.3 percent fewer homes in the third quarter than a year back, it said.In the third quarter, investors purchased nearly 50,000 homes—far below the roughly 100,000 homes they used to buy every quarter in 2021.
“Investors are finding a balance after several years of whiplash: They bought up homes at a frenzied pace in 2021 and the beginning of 2022, then quickly backed off when the housing market slowed as mortgage rates rose,” said Redfin senior economist Sheharyar Bokhari.
“Now there’s a middle ground. It’s less appealing to buy homes to flip or rent out than it was at the start of the pandemic when demand from both homebuyers and renters was robust. But it’s more appealing than it was last year when soaring home prices and borrowing costs put a big damper on demand.”
Online real estate marketplace Zillow is predicting home prices to rise by 2.8 percent over the next 12 months, according to a Nov. 18 report.
It calculates 4.3 million existing homes to be sold in 2025, up from four million units expected this year. Inventory shortage and expectations that mortgage rates could decline are providing support to home prices, Zillow noted.
“At the same time, modest increases in new for-sale listings and persistently high mortgage rates are combining to limit price growth,” the report said.
