For much of the first half of this year, the consensus in the housing market has been that when mortgage rates fall, homebuyers will come.
Now, the 30-year, fixed-rate mortgage weekly average is on a five-week streak of declines — and the homebuyers are indeed emerging.
The Mortgage Bankers Association’s weekly measure of mortgage loan application volume increased 9.4% in the week ended July 4, according to data released Wednesday. It’s the most activity in the market since February 2023.
The index separately measures changes in applications for purchases and refinances, both of which increased 9% on a weekly basis. Compared to the same week in 2024, purchase demand increased 25%, and refinance demand increased a whopping 56%.
In other words: As mortgage rates have eased — in the week ended July 3, the 30-year, fixed-rate mortgage average clocked its largest weekly drop since March — homebuyers have taken advantage of lower borrowing costs.
"Declining mortgage rates are encouraging and, while overall affordability challenges remain, we are seeing more sellers enter the market, giving prospective buyers an advantage,” Sam Khater, chief economist at mortgage giant Freddie Mac, said in a statement last week.
Borrowers are still contending with uncertainty
Of course, more than just the mortgage market dictates borrower behavior, leaving a much more nuanced picture of the market.
On the one hand, trends in home prices and inventory seem to be creating a more favorable environment for homebuyers. Home price growth has slowed, and in some markets, it’s stopped or even started declining. At the same time, there are more houses on the market.
Together, those forces have created greater choice for buyers.
But even so, broader uncertainties could be keeping homebuyers sidelined. A monthly survey mortgage giant Fannie Mae facilitated found that in June, consumer sentiment about the housing market declined. That was mostly due to economic and geopolitical turbulence.
If mortgage rates continue to decline, though, there’s a chance the housing market could finally get a chance to rebound, according to Lawrence Yun, chief economist at the National Association of Realtors.
“The mortgage rate is the magic bullet, and we are just waiting and waiting as to when that could come down," he said at a conference last month. "Housing demand appears to be there, but just not getting realized at the moment.”