The numbers: The housing market is not out of the woods yet, as mortgage demand fell again despite an improvement in rates.
Despite mortgage rates dropping for the fourth consecutive week, mortgage demand fell 9% in the latest week.
Demand for both purchases and refinancing fell. That pushed the market composite index down, a measure of mortgage application volume, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index fell by 9% to 232.4 for the week ending Jan. 27, from a week earlier. A year ago, the index stood at 617.8.
Key details: The refinance index dropped 7.1%, but was down 80% compared to a year ago.
The purchase index — which measures mortgage applications for the purchase of a home — dropped by 10.3% from last week.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 6.19% for the week ending January 27.
That was down from 6.2% the week before, the MBA said.
For homes sold for over $726,200, the average rate for the 30-year was 5.99%.
The 15-year fell to 5.5%.
The rate for adjustable-rate mortgages rose to 5.38%.
The big picture: This week’s report was puzzling. Since rates dropped slightly, more people should have applied for mortgages — yet mortgage applications fell.
The bankers attributed it to volatility. But the drop in applications — particularly purchase applications — could mean buyers were still hesitant. It may also mean the housing market has yet to recover.
But in all fairness, this is just one week of weaker-than-expected data.
What are they saying? “Overall application activity declined last week despite lower rates, which is an indication of the still volatile time of the year for housing activity,” Joel Kan, vice president and deputy chief economist at the MBA, said.
“Purchase activity is expected to pick up as the spring homebuying season gets underway, bolstered by lower rates and moderating home-price growth,” he added.
The MBA also expected mortgage rates to fall further.
Market reaction: The yield on the 10-year Treasury note
fell below 3.5% in early morning trading Friday.
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