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Spring hits the housing market as weekly mortgage applications rise 4.9%

  • Despite flat interest rates, mortgage refinance and purchase applications strengthened last week.
  • Mortgage applications to purchase a home were 10 percent higher than a year ago, signaling that the spring market may be hitting its stride.
  • Buyers have been sidelined by incredibly short supply and by high prices.
A home for sale is seen in Santa Monica, California.
Lucy Nicholson | Reuters
A home for sale is seen in Santa Monica, California.

A rise in the thermometer across much of the country last week may have been just the remedy for an ailing mortgage market. Mortgage applications increased 4.9 percent from the previous week, according to the Mortgage Bankers Association's seasonally adjusted weekly reading.

Mortgage refinance and purchase applications strengthened, despite the fact that interest rates have been stuck in place for weeks. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged at 4.66 percent, with points unchanged at 0.46 (including the origination fee) for 80 percent loan-to-value ratio loans.

"Rates were roughly flat compared to last week, as the downward pressure of geopolitical uncertainty offset the upward pressure of higher inflation and Fed minutes that signaled greater certainty of rate hikes this year," said Joel Kan, an MBA economist.

Applications to refinance a home loan, which are most rate-sensitive, increased 4 percent for the week but were still nearly 10 percent lower than a year ago, when interest rates were lower. Mortgage rates jumped to start this year and are expected to continue to rise. The pause in that increase may have more borrowers willing to jump in and get whatever savings they can.

"Bonds [which mortgage rates loosely follow] haven't exhibited much inspiration for more than a month," wrote Matthew Graham, chief operating officer at Mortgage News Daily. "Although rates have descended modestly since late February, it's just as fair to label that movement as "flat" in the context of typical rate movement. For example, most borrowers would still be quoted the same "note rate," with the only difference being slight changes in upfront fees/points."

Mortgage applications to purchase a home jumped 6 percent for the week and were 10 percent higher than a year ago. That is the strongest reading since January, signaling that the spring market may finally be hitting its stride. Buyers have been sidelined by incredibly short supply and by high prices.

Single-family home construction is recovering at a weak pace, as builders continue to face high costs for land, labor and materials. They are also having trouble finding buildable, desirable land near metropolitan areas, where so many young buyers want to be. The latest read on housing starts showed multifamily construction outpacing single-family, suggesting more confidence in renter demand than buyer demand.

"As single family starts lag, for-sale inventory remains limited. Realtor.com March data shows inventory is 8 percent lower and prices are 8 percent higher than last year," said Danielle Hale, chief economist at Realtor.com.

If mortgage interest rates re-accelerate, fewer buyers will be able to compete in today's market, especially since there is less supply of lower-priced homes. Demand is strong, but as costs rise and buyers are forced to look at cheaper homes, their choices diminish.