The last two weeks of the year are always the slowest in the mortgage business, and while refinance volume took a vacation, homebuyers were apparently busy.
Total mortgage application volume fell 1.5% for the last two weeks of the year, according to the Mortgage Bankers Association's seasonally adjusted index. The MBA released two weeks of data because it was closed over the holidays.
Weaker refinance volume was behind the overall drop, as even falling mortgage rates didn't spark much interest. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.91% from 3.99% two weeks earlier, for loans with a 20% down payment.
"Mortgage rates dropped last week, as investors sought safety in U.S. Treasury securities as a result of the events in the Middle East, with the 30-year fixed mortgage rate declining to its lowest level since early October," said Mike Fratantoni, MBA's chief economist.
Despite the lower rates, refinance application volume fell 8% from the two previous weeks and was 74% higher than a year ago, when interest rates were around 80 basis points higher. Refinance volume was much stronger in the second half of 2019, as interest rates were so much lower.
"Homeowners would need to see a sharp drop in rates to reinvigorate the refinance wave seen in 2019," Fratantoni said.
Mortgage applications to purchase a home increased 5% from the two previous weeks and were 2% higher than a year ago. Buyers today are facing an extremely lean supply of homes for sell, so some are trying to get out early and beat the competition. Real estate agents across the country are reporting extraordinarily strong demand for early January.
Atlanta real estate agent Melissa Fuentes had 34 people come through an open house in just two hours on Sunday. She had a feeling, given how many people were already shopping for mortgages.
"In the middle of December, we really felt the vibe was going to pick up, and the market was going to pick up in January, due to several people calling to get pre-approved in December," said Fuentes. "Typically they call getting pre-approved in February or March."