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The latest data from the Mortgage Bankers Association (MBA) revealed a significant uptick in U.S. mortgage applications, marking a 3% increase from the previous week and the sharpest weekly rise in two months.
The surge came during a decrease in the average contract interest rate for 30-year fixed-rate mortgages, now at 7.41%, the lowest in two months.
Joel Kan, MBA's vice president and deputy chief economist, stated a reduction in U.S. bond yields triggered a decline in mortgage rates as incoming data signaled a softer economy and more signs of cooling inflation.
"Mortgage applications increased to their highest level in six weeks, but remain at very low levels,” he added.
Yields on a 30-year Treasury bond fell to 4.53% at the time of this writing, marking the lowest level in two months. The popular iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) has rallied over 10% over the past month,
This rise in mortgage applications signaled a potential shift in the housing market, possibly driven by cooling inflation and a more approachable interest rate environment.
In its latest housing market outlook, Morgan Stanley anticipated improving affordability for U.S. houses heading into 2024.
Morgan Stanley's experts believed a decrease in mortgage rates could spur a rise in the availability of homes for sale, leading to a modest drop in home prices, around 3%, by the end of 2024.
However, the sustainability of this trend remained to be seen, especially considering the still subdued levels of refinance applications.
Read Also: US Housing Market Braces For Affordability As Mortgage Rates Ease: What Analysts Expect For 2024
Market Reactions: Real estate stocks, as tracked by the Real Estate Select Sector SPDR Fund (NYSE:XLRE), rose 0.7% minutes after the opening bell on Wednesday. Prologis Inc. (NYSE:PLD), American Tower Corp. (NYSE:AMT), CoStar Group Inc. (NASDAQ:CSGP) figured among the sector’s best performers for the day, each posting a 1% increase.
The iShares Mortgage Real Estate ETF (NYSE:REM) also showed a similar performance. Today’s top performers in this niche included NexPoint Real Estate Finance, Inc. (NYSE:NREF), up 2.2%, BrightSpire Capital, Inc. (NYSE:BRSP), up 1.4% and Orchid Island Capital, Inc. (NYSE:ORC) up 1.2%.
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