The numbers: As mortgage rates continue their downward plunge, demand is gradually returning.
Mortgage rates dropped for the fifth week in a row, boosting demand for mortgages by 7.4% in the latest week.
Demand for both purchases and refinancing rose. That pushed the market composite index up, a measure of mortgage application volume, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index rose by 7.4% to 249.5 for the week ending Feb. 3, from a week earlier. A year ago, the index stood at 567.7.
Key details: The refinance index surged 17.7%, but was down 75% compared to a year ago.
The purchase index — which measures mortgage applications for the purchase of a home — rose by 3.1% from last week.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 6.18% for the week ending Feb. 3. That’s down from 6.19% the week before, the MBA said.
For homes sold for over $726,200, the average rate for the 30-year was 5.96%.
The 15-year rose to 5.64%.
The rate for adjustable-rate mortgages rose to 5.56%.
The MBA also noted that the average loan size on a purchase application was $428,500, which is the highest average since May 2022. They said high loan amounts in recent times indicate that this is a sign that those who are purchasing homes are not necessarily first-time buyers.
The big picture: Mortgage rates have fallen point by point in the last few weeks. That’s giving buyers the impression that the housing market is no longer in a recession.
But affordability is still an issue, as well as lower-than-usual inventory. Buyers don’t have that many options, so lower rates may not really move the needle for a price-sensitive buyer who’s also worried about the economic outlook.
What are they saying? “This week’s results are a step in the right direction,” Joel Kan, vice president and deputy chief economist at the MBA, said.
“Purchase activity that was put on hold last year due to the quick runup in rates is gradually coming back,” he added, “as rates ease and housing demand remains strong, driven by supportive demographics and the ongoing strength in the job market.”
Market reaction: The yield on the 10-year Treasury note
fell below 3.66% in early morning trading Wednesday.