Mortgage applications jumped by 12% this week after the average interest rate for the 30-year fixed-rate loan---the most popular mortgage term in the United States---fell for the first time in two months.
The average contract rate for the 30-year fixed-rate mortgage fell to 6.86% from 6.90% the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Points remained unchanged at 0.70.
The recent drop in mortgage rates was not huge. However, it is the first time rates dropped in the past two months, spurring buyers to come back to the market.
Growing Demand for Mortgage Applications
In fact, the demand for mortgage applications increased 12% from the previous week and was even 52% higher in the same week in 2023, per the MBA's Weekly Mortgage Applications Survey.
This could signal a growth in housing demand as we head into the end of 2024.
That said, applications for home refinancing dipped by 3% this week but still remained 119% higher than the rate in the same week last week.
"Purchase activity drove overall applications higher last week, as conventional purchase applications picked up pace and mortgage rates declined for the first time in over two months," Joel Kan, vice president of the MBA, said in the report.
Read more: Half of US Homeowners Under 50 Feel Trapped in Their Homes Due to Mortgage Rates, Survey Finds
What Does This Mean for the Housing Market?
Mortgage rates could decline further after economic data is released next Wednesday. However, it is important to note that market conditions are unique, especially around the holidays. This means interest rates could go in either direction, according to CNBC.
It is unclear how mortgage rates will move next year, but Zillow predicts the housing market will likely see buyers coming back. According to its forecast, Zillow said home values may rise about 2.6% in 2025 while existing home sales could increase to 4.3 million, up slightly from the projected 4 million this year.
Affordability issues will still remain, but the real estate website said buyers should expect more homes to enter the market. This means there will likely be more options for hopeful homeowners to choose from as well as more room for negotiations.
