As more homes enter the market, mortgage demand picks up after the Labor Day lull.

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As more homes enter the market, mortgage demand picks up after the Labor Day lull.

According to a new survey from the Mortgage Bankers Association, mortgage demand has recovered from its post-Labor Day slump and is now at its highest level since April (MBA).

The MBA’s seasonally adjusted index indicated a nearly 5% increase in total mortgage application volume for the week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan sums ($548,250 or less) has remained steady from the previous week.

This week’s applications were 2% more than previous week’s, but they were still 13% lower than the same time last year. This represents some relief following a rough summer marked by a record housing shortage exacerbated by soaring costs.

According to MBA’s senior economist Joel Kan, the low supply problem and high prices are still prevalent, but “the inventory situation is improving” as more homes are built and more homeowners list their homes for sale, according to CNBC.

Mortgage refinance rates have also improved, gaining 7% this year while remaining 5% lower than last year.

The housing market has been plagued by problems that predate and are exacerbated by the COVID-19 pandemic.

A labor scarcity in the construction of new dwellings existed prior to the pandemic, and it has remained since then. The scarcity of laborers has increased the cost of building a new home, while COVID-19’s disruption of global supply networks has increased the cost of construction supplies.

Land prices were also pushed up by pandemic-related demand. In other circumstances, builders are identifying an economic situation in which demand is excessively high and unlikely to be met immediately. As a result, they reduced building, thus lowering supply.

There are some encouraging indicators that these issues are subsiding. Lumber, one of the most important building components for new homes, fell sharply in price this week, from $1,600 to $400, boosting homebuilders’ confidence in the market.

The National Association of Home Builders/Wells Fargo Housing Market Index revealed new data on Monday that reflected this, showing a five-month high for the industry, driven by lower lumber prices.

However, buyers’ affordability of new homes remains a concern, as do the risks posed by growing inflation.

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