It’s been almost two months since mortgage rates surged again, and my initial assumption was that this would negatively impact housing demand. We experienced a positive 18-week period with purchase applications before mortgage rates started to rise in September. I predicted that these increases would result in the same decline in purchase applications that we saw earlier in the year. Surprisingly, demand has held up better than expected. While we aren’t seeing the same growth as before, we also aren’t as negative as initially anticipated. Let’s delve into the data.
Purchase application data
Despite six weeks of rising mortgage rates, I expected purchase applications to predominantly show a decline. However, the data has been relatively flat, with three positive and three negative prints in the week-to-week data.
Comparing the purchase application data during higher mortgage rates earlier in the year (6.75%-7.50%), we had:
- 14 negative prints
- 2 flat prints
- 2 positive prints
As mortgage rates started to decrease in mid-June, the purchase applications responded with:
- 12 positive prints
- 5 negative prints
- 1 flat print
Expecting more weakness as rates increased, the next few weeks will be crucial as historical data shows an early spring surge in demand when rates were falling. Last week saw a 2% week-to-week growth but was down 1% year over year.
Weekly pending sales
The Altos Research weekly pending contract data offers real-time insights into demand. Despite higher home prices and mortgage rates compared to last year, the pending contract data remains resilient. This trend is worth monitoring closely.