Mortgage demand slumps over the holidays

Mortgage demand fell over the holidays despite declining mortgage rates.

Mortgage applications decreased 9.4% for the week ending Dec. 29 compared to two weeks earlier, according to data from the Mortgage Bankers Association (MBA).

The 30-year fixed mortgage rate closed 2023 at 6.76%, more than one percentage point lower than its October peak of 7.9%, according to Joel Kan, MBA’s vice president and deputy chief economist.

“The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response, with the overall level of purchase activity 12% lower than a year ago,” Kan said in a statement.

Purchase applications decreased by 5% week over week on an adjusted basis. Meanwhile, refinance applications remained at very low levels but were 15% higher than a year ago.

“The housing market has been hampered by a limited supply of homes for sale, but the recent strength in new residential construction will continue to help ease inventory shortages in the months to come,” Kan added. 

The share of Federal Housing Administration (FHA) loan activity decreased to 14.5% from 15% the week prior. The share of Department of Veterans Affairs (VA) loan activity was 14.6%, down from 17.3% over the previous week, while the share of U.S. Department of Agriculture (USDA) loan activity increased to 0.5% compared to 0.4% the previous week.