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U.S. Mortgage Demand Falls as Buyers Struggle With Low Number of Home Listings - The Jenn Pfeiffer Team
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U.S. Mortgage Demand Falls as Buyers Struggle With Low Number of Home Listings

U.S. Mortgage Demand Falls as Buyers Struggle With Low Number of Home Listings

By Aarthi Swaminathan | REALTOR.COM

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 was over 4% in early morning trading Wednesday.

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