Mortgage demand fell for just the second time in the last eight weeks to end 2023, according to the latest data from the Mortgage Bankers Association.
- The mortgage market index fell to 173.5 to end 2023, down 9.4% from the prior reading two weeks ago and the lowest level since November 12th.
Double Decline. Both purchases and refis fell to close out the year. Purchase demand fell to an index of 140.7, down 7.5% from the last reading two weeks ago and the lowest level since November 19th.
- Refinance demand plummeted to an index of 358.2, an 18% drop from the prior reading two weeks ago and the lowest level since November 26th.
Rates Rise. The average contract interest rate for a 30-year fixed-rate mortgage rose for the first time in 10 weeks to 6.76%, up 5 basis points from the prior week but ended the year up just 34 basis points from the start of 2023.
Analysis. Joel Kan, MBA’s Vice President and Deputy Chief Economist, said that dropping rates has been great but inventory problems persist. “The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response, with the overall level of purchase activity 12 percent lower than a year ago…The housing market has been hampered by a limited supply of homes for sale, but the recent strength in new residential construction will continue to help ease inventory shortages in the months in come.”
BOTTOM LINE: Falling rates is great but if we don’t get an inventory surge demand can only rise so high.