U.S. mortgage applications to buy a home surged last week to the highest level since early 2023, despite still-elevated borrowing costs.
The Mortgage Bankers Association’s index of home-purchase applications jumped 7.6% to 181.6 in the week ended Nov. 21, data from the group showed Wednesday. The contract rate on a 30-year fixed mortgage rate ticked up to a more than one-month high of 6.4%.
While a sustained surge in purchase activity would certainly be welcome in a housing market that has struggled to gain momentum, the weekly figures tend to be volatile around holiday periods.
MBA’s measure of refinancing, meantime, declined to the lowest level since early September.
The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.
The mortgage application increase comes as pending sales of previously owned U.S. homes rose in October by more than forecast as buyers took advantage of a decline in mortgage rates.
An index of contract signings increased 1.9% to 76.3, the highest in nearly a year, according to data issued Tuesday by the National Association of Realtors. The median projection in a Bloomberg survey was for a 0.2% gain.
A decline in mortgage rates to a one-year low during the month, along with a pickup in inventory this year, helped encourage potential buyers to step off the sidelines. At the same time, the path forward for the housing market may prove challenging without a further decline in home financing costs as prices stay elevated.
The 30-year fixed rate is currently hovering just under 6.4% after falling in October to a low of 6.3%.
A slight pickup in mortgage applications for purchases suggests sales will gradually improve over the next several months, Charlie Dougherty, senior economist at Wells Fargo & Co., said in a note last week.
“While there is further scope for improvement in the months ahead, we do not anticipate a strong rebound as elevated homeownership costs remain a constraint,” Dougherty said. “What’s more, the bulk of mortgaged homeowners still hold sub-5% mortgage rates, well below where mortgage rates currently prevail.”
The NAR’s report showed contract signings rose in three of four US regions, led by a 5.3% increase in the Midwest. Pending sales climbed 1.4% in the South, the biggest home-selling region, but fell in the West.
Pending-homes sales tend to be a leading indicator for previously owned homes, as houses typically go under contract a month or two before they’re sold.