New Year, New Heights: Housing Market Surges With A 9.9% Spike In Mortgage Applications

As the new year unfolds, the housing market is making headlines with a surge in mortgage applications, marking a 9.9% uptick from just a week ago despite a slight increase in mortgage interest rates.

Insights from the Mortgage Bankers Association's (MBA) Weekly Mortgage Application Survey, adjusted for the New Year's holiday, reveal a promising start for the housing market.

"Despite an uptick in mortgage rates to start 2024, applications increased after adjusting for the holiday," MBA Vice President and Deputy Chief Economist Joel Kan said. "The increase in purchase and refinance applications for both conventional and government loans is promising to start the year but was likely due to some catchup in activity after the holiday season and year-end rate declines. Mortgage rates and applications have been volatile in recent weeks, and overall activity remains low."

Refinancing increased to 38.3% of total applications from 36.3% during the previous week. Adjustable-rate mortgages (ARMs) declined to 5.4% of total applications.

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The spike in mortgage applications signifies that buyers are more optimistic about being able to buy a home and that people believe mortgage rates will fall over the next year, according to a Fannie Mae survey on market sentiment.

"Mortgage rate optimism increased dramatically this month, with a survey-high share of consumers anticipating mortgage rate declines over the next year," Fannie Mae Deputy Chief Economist Mark Palim said in a statement.

The Federal Housing Administration (FHA) share of mortgage applications dropped to 14.4% from 14.5% the previous week, while the Veterans Affairs (VA) portion increased to 16.3% from 14.6%. The U.S. Department of Agriculture's share of applications declined to 0.4% from 0.5% a week earlier.

The average interest rate for contracts with a 30-year fixed-rate mortgage backed by the FHA increased to 5.56% from 6.51%. For a 15-year fixed-rate mortgage, the average interest rate increased to 6.41% from 6.26%.

The increase in rates to start the year is still lower than the 8% peak seen in October, making buyers more comfortable about exploring the housing market, Realtor.com Chief Economist Danielle Hale told Newsweek.

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"When you see purchase rates tick up, it's likely that first-time buyers are an important part of that share," Hale said. "We're likely to see some repeat buyers come back into the market, too."

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