Stronger mortgage demand foreshadows increased home sales in September

After a Labor Day lull, mortgage demand rose sharply last week from homeowners and homebuyers.

Total mortgage application volume rose nearly 5% for the week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Mortgage interest rates, however, have not budged, and not in the past four weeks. The average contractual interest rate for 30-year fixed rate mortgages with compliant loan balances ($ 548,250 or less) remained unchanged at 3.03%, with points declining to 0.30 from 0. 32 (including set-up costs) for loans with a down payment of 20%.

Home loan requests increased 2% on the week, but were still 13% lower than a year ago. This annual comparison, however, is declining. Homebuyers really pulled back over the summer as soaring prices and record low supply created a toxic mix. Demand to buy last week was the highest since April.

“Housing demand is strong heading into fall, despite rapidly rising home prices and low inventories. The inventory situation is improving, with more new homes under construction and more homeowners putting in their house for sale, “said Joel Kan, MBA economist.

Mortgage refinancing requests increased 7% on the week, but are down 5% from a year ago.

“This week’s refinancing gain was driven strongly by an increase in FHA and VA applications,” Kan said.

These are low down payment loans offered by the federal government and tend to be favored by low income buyers or first time home buyers.

Mortgage applications to buy a newly built home unexpectedly increased in August, according to another report from the MBA. They generally decline in August due to seasonality, but demand seems to return despite still significant price increases.