With Buyers coming back into the marketplace early in the year, I see a successful high season, the best time of the year to sell real estate.
Mortgage demand showed a positive upswing at the beginning of the year, with a 9.9% increase in applications for the week ending January 5, 2024, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. This figure, adjusted for the New Year's holiday, marks a significant rebound from the previous week.
On an unadjusted basis, the index surged by 45% compared to the prior week. The holiday-adjusted refinance index witnessed a notable 19% increase from the previous week, standing 30% higher than the same week in the previous year. The unadjusted refinance index also saw a robust 53% increase from the previous week, marking a 17% rise compared to the same week one year ago.
Joel Kan, MBA's vice president and deputy chief economist, commented on the positive trend, stating, "Despite a rise in mortgage rates at the start of 2024, applications increased after adjusting for the holiday. The growth in both purchase and refinance applications for conventional and government loans is a promising start to the year, although it is likely driven by a catch-up in activity post the holiday season and year-end rate declines. Mortgage rates and applications have displayed volatility in recent weeks, and overall activity remains relatively low."
Breaking down the data further, the seasonally adjusted purchase index increased by 6% from the previous week. On an unadjusted basis, the purchase index surged by 40% compared to the prior week but was 16% lower than the same week in the previous year.
Additional insights from the MBA's index include an increase in the refinance share of mortgage activity to 38.3% of total applications, up from 36.3% the previous week. Meanwhile, the adjustable-rate mortgage (ARM) share of activity decreased to 5.4% of total applications.
The FHA share of total applications decreased slightly to 14.4% from 14.5%, with the VA share increasing to 16.3% from 14.6%. The USDA share of total applications dipped to 0.4% from 0.5% the week before.
Average contract interest rates saw modest increases across various mortgage categories. For instance, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to 6.81%, while the 30-year fixed-rate mortgages with jumbo loan balances increased to 6.98%. The survey, which has been conducted since 1990, encompasses over 75% of all U.S. retail residential mortgage applications, involving respondents from mortgage bankers, commercial banks, and thrifts.
