U.S. mortgage applications increase, but it's still a seller's market

Jan. 25 (UPI) -- With inflationary pressures easing, the Mortgage Bankers Association said Wednesday that would-be home buyers are responding to lower interest rates, though it remains somewhat a seller's market.

The association reported applications for a mortgage to buy a new home increased by 7% during the seven-day period ending Jan. 20, moving in response to a decline in lending rates to an average of 6.3% for a 30-year, fixed-rate term -- the lowest since September.

"Overall applications increased with both gains in purchase and refinance activity, but purchase applications remained almost 39% lower than a year ago," said Joel Kan, a deputy chief economist at the the association.

"Homebuying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market."

Kan added that many homebuyers are waiting for the market to turn, with sellers enjoying above-asking prices in many cases. Lower interest rates, meanwhile, aren't enough to incentivize refinancing, where activity is about 75% behind the pace from last year.

That's in large part because home mortgage rates still are about 2% higher than year-ago levels, which provides little incentive for would-be sellers who may be enjoying rates as low as half the current level.

Through December, meanwhile, the national average price for a single-family home increased to $366,900 last year from $358,000 in 2021. The level of first-time buyers set a historic low point last month.

Lending rates, however, could move lower as inflation in the U.S. economy drifts further away from the double-digit levels during summer. Canada's central bank on Wednesday raised its overnight lending rate by 0.25%, lower than in the past, saying inflation is expected to decline "significantly" in 2023.

The U.S. Federal Reserve could follow suit in February, easing back on the aggressive rate hikes imposed during 2022.