The traditionally busiest time of year for buying and selling real estate could be a bust, early data suggests
Mortgage rates inched down to their lowest level in six weeks, but the drop wasn't enough to lure home buyers back into the game. The chill could be a sign of what's to come during the spring home-buying season.
The lower average rate on the 30-year fixed-rate mortgage spurred a small flurry of refinancing activity as homeowners sought lower rates on their loans.
But purchase activity - buyers applying for mortgages to purchase a home - fell as would-be buyers steered clear of the housing market.
Mortgage rates are not expected to fall significantly over the next few months. And "with little room for mortgage rates to fall much from current levels, we expect another weak spring buying season," Bradley Saunders, an economist focused on North America at Capital Economics, wrote in a note.
Mortgage rates fall across the board
An uptick in the demand for mortgages stems from an increase in refinancing activity. Applications for mortgages in the latest week rose, pushing the market composite index - a measure of mortgage-application volume - up in the last week, the Mortgage Bankers Association said Wednesday.
Refinancing activity rose 12.2% from the previous week, while purchase activity fell 3.5% over the same period.
Mortgage rates fell across the board.
The average contract rate for a 30-year mortgage for homes sold for $766,550 or less was 6.97% for the week ending Jan. 31. That was down 5 basis points from the previous week.
The average rate for a jumbo loan, or a 30-year mortgage for homes sold for over $766,550, was 7.01%, down 1 basis point from the previous week.
The average rate for a 30-year mortgage backed by the Federal Housing Administration was 6.69%, down 3 basis points from a week ago. Those loans are often used by first-time home buyers.
The average 15-year mortgage rate was down 1 basis point, to 6.36%.
The rate for the five-year adjustable-rate mortgage was down 37 basis points from the previous week, to 6.07%.
Mortgage activity signals how weak spring home-buying season could be
Even though mortgage demand was up overall, the numbers foretell more sluggishness for what is typically the busiest season for the residential real-estate industry.
Mortgage applications jumped 11.4% between December and January, the largest increase in two years. But that increase comes from a very low base, Capital Economics' Saunders said.
"Activity remains extremely depressed compared to the historical average," he said. That's why he's expecting a slow buying season this spring.
Record-high home prices and 7% mortgage rates have hammered the housing market, with many buyers pushed out by unaffordable home prices.
And early indications point to another weak year for home sales, should mortgage rates stay high.
Pending home sales, another leading indicator for sales of existing homes, fell by 5.5% in December compared with the month before. Pending home sales refers to contracts being signed to purchase a home, before the sale is closed.
"With the chances of the [Federal Reserve] lowering interest rates at all this year rapidly fading, mortgage rates do not look likely to fall far enough to stimulate any significant recovery in homebuying activity anytime soon," Saunders said.
Taken together, the early reads of the 2025 housing market paint a picture of a market that isn't yet in recovery mode, even if some real-estate observers had hoped for one.
-Aarthi Swaminathan
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