The numbers: U.S. mortgage applications fell as home buyers struggled with a low number of home listings and rising home prices.
Home-buying demand was dampened due to a persistent lack of supply. The overall market composite index — a measure of mortgage application volume — decreased in the last week, according to the Mortgage Bankers Association (MBA) said on Wednesday.
The market index fell 7.2% to 202.5 for the week ending January 26 from a week ago. A year ago, the index stood at 233.0.
Key details: The purchase index — which measures mortgage applications for the purchase of a home — fell 7.2% from a week ago.
The refinance index fell 11.4%, as homeowners saw little incentive to do so.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 6.78% for the week ending January 26. That’s unchanged from the week before.
The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 6.94%, also unchanged from the previous week.
The average rate for a 30-year mortgage backed by the Federal Housing Administration was up to 6.61% from 6.51%.
The 15-year rose to 6.34% from 6.31% from the previous week.
The rate for adjustable-rate mortgages rose to 6.23% from last week’s 6.22%.
The big picture: Home buyers in today’s market are struggling with three challenges: High rates, rising home prices, and increased competition over few home listings.
The first has been easing up, as rates stay below 7%, and a U.S. Federal Reserve meeting this week could lead to further declines.
But a drop in rates could push more buyers into the market, further heating up home prices, at a moment when the inventory of homes is lower than normal.
Unless homeowners have enough reason to sell their current homes with mortgage rates as low as 2%, the market is going to continue to plod along.
What the MBA said: “Low existing housing supply is limiting options for prospective buyers and is keeping home-price growth elevated, resulting in a one-two punch that continues to constrain home purchase activity,” Joel Kan, vice president and deputy chief economist at the MBA, said in a statement.
“The average loan size for purchase applications has picked up in recent weeks to $444,100, the largest average loan size since May 2022,” he added.
Market reaction: The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was over 4% in early morning trading Wednesday.
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