Recent data shows that mortgage applications are declining, even with slightly lower mortgage rates. According to the latest Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, mortgage application volume decreased by 0.7% for the week of March 22, 2024, compared to the previous week.
“Mortgage application activity was muted last week despite slightly lower mortgage rates. The 30-year fixed rate edged lower to 6.93 percent, but that was not enough to stimulate borrower demand,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications were essentially unchanged, as homebuyers continue to hold out for lower mortgage rates and for more listings to hit the market.”
While many potential buyers are waiting for better mortgage rates, holding out may not be the best move in today’s market. Here’s why declining mortgage applications could be a signal to act now.
1. It’s More Likely Your Offer Will Be Accepted
When fewer buyers are in the market, the competition for homes decreases. This means sellers may be more inclined to accept your offer, as they aren’t fielding as many bids from other potential buyers. This lower competition could make it easier to secure your dream home without getting into a bidding war.
On the flip side, if you wait for lower mortgage rates, you may find yourself competing against a larger pool of buyers, driving up competition and possibly reducing your chances of getting the home you want. Acting now, with fewer buyers in the market, can increase the likelihood of your offer being accepted.
2. You Could Have More Negotiating Power
Lower buyer demand doesn’t just make it easier to get your offer accepted—it can also give you more room to negotiate. In a hot market where sellers are receiving multiple offers, buyers often have to bid above the asking price just to be considered. However, with fewer buyers in the market, sellers may be more open to negotiating on the price or terms of the sale.
If you wait too long, home prices could continue to climb as buyer demand increases. According to Caryn Prall, Chief of Growth and Industry at Keller Home Loans, “With our record low inventory, even when rates drop, there is not going to be enough supply for demand. This will keep prices steady or increasing.” By purchasing now, you could negotiate a better price before competition heats up again.
3. You Can Still Benefit From Lower Rates in the Future
Buying a home now doesn’t mean you’re stuck with today’s mortgage rates for the long haul. There are options available that allow you to benefit from future rate drops:
- Opting for an Adjustable-Rate Mortgage (ARM): ARMs start with a fixed-rate period, typically lasting anywhere from a couple of years to 10 years, followed by an adjustable-rate period. If mortgage rates decline in the future, your rate could adjust lower, allowing you to take advantage of the savings. However, it’s important to understand that if rates increase, your mortgage rate could rise as well.
- Refinancing when rates decline: Another option is to buy now and refinance your mortgage when rates decrease. This allows you to purchase a home while buyer demand is low and, later, secure a more affordable mortgage rate if conditions improve.
With fewer buyers in the market, now could be the ideal time to purchase a home, securing a favorable deal before competition rises again. Waiting for lower mortgage rates may seem like the best option, but in the meantime, home prices could continue to increase, and you may find yourself competing with a larger pool of buyers. Acting now could allow you to capitalize on today’s buyer-friendly conditions while still leaving the door open for future rate reductions through refinancing or an ARM loan.
If you’re ready to make a move, it’s worth exploring your mortgage loan options and speaking with a local real estate agent to get started.