Elevated Mortgage Rates Aren’t Scaring Off Homebuyers

More house hunters are making home purchases, with a pair of reports Wednesday showing improvement in the housing market as inventory increases and more people feel secure about the economy.

The National Association of Realtors (NAR) Pending Home Sales Index was 2% higher in October than in the prior month, a bigger increase than economists surveyed by The Wall Street Journal and Dow Jones Newswires had projected.  

It’s also the second straight month that pending home sales were higher than the same time last year. Last fall, home sales were held down by expensive mortgage rates and low housing inventory, trends that are now moving in the other direction.

“Homebuying momentum is building after nearly two years of suppressed home sales,” said Lawrence Yun, chief economist for NAR. 

Mortgage Rates Fall for First Time in Two Months

Another housing market report issued today also shows increased home-buying activity.

Demand for mortgage applications increased 6.3% for the week ending Nov. 22, with applications for home purchases rising 12%, Mortgage Bankers Association (MBA) data showed.

The jump in demand comes as rates for the 30-year, fixed-rate mortgage fell for the first time in two months to hit 6.86%. After dipping somewhat this summer, mortgage rates have increased in recent weeks despite the Federal Reserve cutting its influential federal funds interest rate. 

“With the growth in for-sale inventory and signs that the economy remains strong, buyers have remained in the market even though rates have increased recently,” said Joel Kan, MBA vice president and deputy chief economist.