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Housing Market Continues to Struggle As Spring Buying Season Nears
February 4, 2025
Prospective homebuyers remain hesitant to buy even as more listings come up for sale, pointing to a sluggish start to the key spring buying season. Mortgage rates have hovered at their elevated levels for several weeks and prices continue to rise, hurting demand.
Applications for mortgages meant to purchase a home continued to slide, falling 4% last week from the week prior. Demand is flat relative to the same week a year earlier, according to the Mortgage Bankers Association’s (MBA) seasonally adjusted index.
Mortgage applications to buy a home are now 39% lower than in February 2020, just prior to the pandemic. Home sales are at the lowest levels in nearly 30 years, and prices continue to reach record highs.
While demand for purchase loans is falling, the size of those loans continues to climb as home prices rise. The average amount for a purchase loan reached $447,300 last week, according to the MBA. That is the highest level since last October.
Mortgage rates inched lower this week, with the average rate for a 30-year fixed mortgage falling from 7.02% to 6.97%, and the rate is 17 basis points lower than during the same week last year. The decrease was not enough to spur home purchasing, but mortgage applications to refinance a home loan saw a sizable increase, climbing 12% from the previous week and 17% from the same week a year prior. Still, the MBA notes that the large percentage increases are a sign that absolute volume is so low for refinance applications at the current rates.
The supply of homes for sale is increasing, climbing 25% from a year earlier, but much of that gain is because homes are sitting on the market longer. The average home sold in January was on the market for 54 days, the longest since March 2020, according to Redfin. Despite the increase in volume inventory remains strained, with the supply of homes for sale standing 25% lower than in the period preceding the pandemic. Few sellers have seen the increased inventory as an impetus to lower prices, with just 15.6% offering price cuts in January.
