'Pent-Up': Mortgage Demand Jumps 52% Year-Over-Year Amid Fed Rate Cuts

Homebuyers are storming back into the market, driving purchase mortgage applications up 52% from last year as interest rates ebb following Federal Reserve cuts.

According to new data from the Mortgage Bankers Association, the surge reflects pent-up demand unleashed by postelection certainty and improved housing inventory.

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Total mortgage demand rose 6.3% last week as the average 30-year fixed rate dipped to 6.86% from 6.90%. Purchase applications spiked 12% week-over-week, pushing the average loan size to $439,200 – its highest level in nearly a month.

“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 economist, noting the jump in conventional purchase applications drove the increased loan sizes.

The buying momentum appears widespread. Redfin’s Homebuyer Demand Index posted its largest year-over-year increase since January 2022, with buyer inquiries up 17% to their highest level since August. The surge started immediately after the election and has continued through two consecutive Fed rate cuts.

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“The burst of buyers and sellers jumping into the market is the result of pent-up demand from people who were waiting for the election to pass and for the Fed to cut interest rates a second time,” Chen Zhao, Redfin’s Economic Research Lead, said in a press release.

Available housing stock has improved markedly from 2023’s extremely tight inventory, with total listings up 11.8% year-over-year. New listings also edged up 0.4%, providing more options for eager buyers.

Redfin agent Meme Loggins noted surprising market velocity despite traditionally slower seasonal patterns. “The market is moving surprisingly quickly right now, given that rates are fairly high and we’re well into fall, when buyers and sellers are typically winding down for the holidays.”

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"I'm advising buyers who can afford today's high costs to move forward because prices are lower in this area than they were a year ago and they're likely to shoot back up soon as competition heats up," the Portland, Oregon-based agent said. "And sellers should consider listing now because there are serious buyers out there – especially for desirable homes."

While purchase activity soars, refinancing applications declined 3% week-over-week but remained 119% above 2023 levels. The MBA noted the annual comparison was skewed by different Thanksgiving week timing between years.

Mortgage rates began this week slightly lower at 6.78%, down from 7.44% a year ago.

With pending home sales up 4.5% annually through mid-November, the data suggests sustained momentum in the housing market recovery despite historically elevated rates.

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