Bright Spots for Real Estate: Lower Rates and Uptick in Mortgage Applications

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Two sets of data released Wednesday offer some optimism for the housing market amid lower mortgage rates.

A National Association of Home Builders index measuring builder confidence gained for the first time since December 2021, according to trade group data released Wednesday. The index increased four points, to a reading of 35. 

Although builders’ view of the housing market remains negative—an index level below 50 representing a poor view of market conditions—the trade group said that the lows for two measures of home construction activity, single-family permits and starts, could be close.

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 “While NAHB is forecasting a decline for single-family starts this year compared with 2022, it appears a turning point for housing lies ahead,” Robert Dietz, the trade group’s chief economist, said in a statement. “In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability.”

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In a release, the Home Builders group said “a modest drop in interest rates” contributed to the uptick. Mortgage rates in 2023 have remained below their late 2022 peak above 7%.The average 30-year fixed-rate mortgage last week was 6.33%, a drop of 0.15 percentage points from the previous week, but nearly three points higher than the same week last year, according to

Freddie Mac

data.

The builders’ confidence reading wasn’t the only hopeful sign. Mortgage application volume gauged by the Mortgage Bankers Association also increased. Purchase applications gained roughly 25% week-over-week to the highest level since September 2022. Refinance applications also increased, rising 34% from the week prior. While the indexes increased significantly from the week prior, they remained 35% and 81% below their levels one year ago, the data showed. 

The week-over-week gain coincided with the trade group’s gauge of mortgage rates falling to 6.23%, the lowest such level since early September 2022. 

“Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall,” Mike Fratantoni, the trade group’s chief economist, said in a statement. “As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time home buyers.”

Write to Shaina Mishkin at shaina.mishkin@dowjones.com