Demand for mortgages increased for the second week in a row, despite some volatility in mortgage rates.
Total application volume rose 6.5% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell from 6.79% to 6.71%, with points falling from 0.79 to 0.80 (including the initial fee ) for loans with a 20% payment discount.
That was the average, but mortgage rates were largely higher for much of the week before falling sharply on Friday following news of the Silicon Valley Bank’s bankruptcy.
Despite rates being higher, mortgage applications to buy a home rose 7% this week, but were still 38% lower than the same week a year ago. House buying essentially ground to a halt in early February after rates rose by about a full percentage point, but they now seem to be coming back, perhaps because buyers fear rates will go even higher. The question is how long will that take?
“That always happens when rates go up and it only takes a few weeks,” said John Burns of John Burns Real Estate Consulting, who said he saw an increase in new home sales in February despite higher rates.
Lennar, the nation’s second-largest homebuilder, posted better-than-expected earnings on Tuesday, with company chairman Stuart Miller saying in the release: “HOUSEBUYERS are considering the possibility that the current interest rate environment could become the new normal. Accordingly, , the housing market continues to shift as growing family and family formation continued to drive demand against a chronic supply shortage.”
Applications to refinance a home loan were up 5% from the previous week, but were down 74% from a year ago.
Mortgage rates fell further on Monday, according to a separate survey by Mortgage News Daily, but rose again higher on Tuesday after the February consumer price index was released, suggesting the Federal Reserve could raise rates again next week despite the recent turmoil in the banking sector.