With mortgage rates at months-long lows, more homebuyers are getting off the sidelines and into the market.
Applications for mortgages surged last week, climbing more than 20% in the week-long period that ended Friday, according to data released Wednesday by the Mortgage Bankers Association, a trade group that tracks the mortgage market. It was the largest weekly increase in activity since January.
At the same time, the 30-year, fixed-rate mortgage is hovering at 6.7% to 6.8%, near its lowest point since late last year.
It's a marked change from the first two months of the year, a period that saw a mostly stagnant mortgage market. During that time, rates were mostly bound to around 7%, keeping demand for mortgages stifled as buyers waited for a more palatable rate.
More than that, the drop in mortgage rates is coinciding with the onset of spring, historically the busiest time in the residential real estate market.
"This is a period where we typically see purchase activity ramp up," Joel Kan, vice president and deputy chief economist of the Mortgage Bankers Association said in a statement. "Purchase applications were up over the week and continued to run ahead of last year’s pace."
It could be a busy spring housing market
The surge in buyer activity is also a shift from this time last year. In 2024, many housing market insiders found themselves awaiting a spring homebuying season that never came.
This year, though, there are signs that an uptick in activity could be coming. For example, in addition to easing mortgage rates, there are more houses available for sale, according to the National Association of Realtors.
"More housing supply allows strongly qualified buyers to enter the market,” Lawrence Yun, the group's chief economist, said in a statement last month. “For many consumers, both increased inventory and lower mortgage rates are necessary for them to purchase a different home or become first-time homeowners.”
Others are more speculative, though, especially as home prices seem to be growing faster. Ken Johnson, Walker Family chair of real estate at the University of Mississippi, for one, said he isn't sure the recent fall in mortgage rates is here to stay.
“The likelihood of this signaling that we’re finally on this glide slope of coming in at lower rates, I don’t think this is it,” he said in an interview last week. “That doesn’t mean I don’t think we’re going to get there. I just don’t think this is it.”
A similar bait-and-switch showed up last fall ahead of the election. By the end of September, mortgages were averaging their lowest rates in two years and mortgage applications were following a similar trajectory. But as the election drew closer, and uncertainty about its results spread across the country, things quickly turned the opposite way.
In the coming weeks, the risk of similar uncertainties unfolding is high, according to Johnson.
“We’re stuck for quite some time as we deal with uncertainty in the overall investment market, everything from owning a house to a business, stocks, bonds,” he said. “Until that becomes clear, we’re going to probably have relatively high interest rates.”