The numbers: Home buyers appear to have adjusted to higher rates, as mortgage applications rose in the latest week despite rates staying put.
Rates were unchanged from last week, staying at the highest level in 23 years, as the market remained uncertain about the U.S. Federal Reserve’s plans to hike interest rates in the near term.
The 30-year rate averaged 7.31%, which was the highest level since December 2000.
Yet demand for both purchases and refinancing rose. That overall pushed the market composite index — a measure of mortgage application volume — up, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index rose 2.3% to 189 for the week ending August 25 from a week earlier. A year ago, the index stood at 260.1.
Key details: Applications for home purchases and refinances increased for the first time in five weeks.
Some buyers may have accepted the new normal of 7% rates, opting to refinance later on when they fall. The purchase index — which measures mortgage applications for the purchase of a home — rose 2% from last week.
On a year-over-year basis, purchase applications were still down 27%.
And some homeowners took the opportunity to refinance. The refinance index rose 2.5%.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 7.31% for the week ending August 25. That’s unchanged from the week before, the MBA said.
The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 7.28%, up from 7.27% the previous week.
The average rate for a 30-year mortgage backed by the Federal Housing Administration rose to 7.1% from 7.09%.
The 15-year stayed flat at 6.72%, as compared with the previous week.
The rate for adjustable-rate mortgages fell to 6.48% from last week’s 6.5%.
The big picture: Generally, when rates go up, buyers take a pause until they fall. But with inventory being as low as it is, some are opting to move fast and buy now — regardless of the rate — and refinance later. That’s being reflected in this week’s slight uptick in applications.
What the MBA said: “Treasury yields peaked early in the week and did move lower by the end, which may have spurred some activity,” Joel Kan, deputy chief economist and vice president at the MBA, said in a statement.
Market reaction: The yield on the 10-year Treasury note BX:TMUBMUSD10Y was below 4.2% in early morning trading Wednesday.