Buyers Return As Housing Inventory Grows Despite High Rates

Homebuyers are returning to the market in growing numbers, even as interest rates remain elevated. It’s a shift that defies conventional market wisdom and reflects the evolving dynamics of today’s housing landscape.

Mortgage application volume rose 1.1% last week, marking the second straight weekly increase. Purchase applications climbed 2% and are now 18% higher than the same period last year.

Why buyers are jumping in despite high rates

The resilience of buyer demand comes despite the average 30-year fixed-rate mortgage with conforming loan balances climbing to 6.86%, up from 6.84% the previous week.

This rate sits 22 basis points higher than the same week one year ago, with points holding steady at 0.68, including origination fees, for loans with a 20% down payment.

According to Michael Fratantoni, chief economist for the Mortgage Bankers Association (MBA), the rise in home inventory is enabling more transactions — a shift from the limited supply seen over the past two years, even amid ongoing economic uncertainty.

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More homes = more buying activity

After years of historically low housing inventory that frustrated potential buyers, the market is finally seeing a meaningful increase in available homes. Total active listings nationally are approximately 14% higher than they were at this time last year, while new listings have increased by 5.5%.

This expanding supply creates more options for buyers who had previously been sidelined by both high rates and limited choices. The improved selection is outweighing concerns about interest rates, economic uncertainty, and even potential tariff impacts.

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First-time buyers seize the opportunity

First-time and lower-income homebuyers appear to be particularly active in the current market. Government purchase applications, which typically appeal to these demographics due to lower down payment requirements, increased nearly 5% for the week and stand 40% higher compared to a year ago.

While purchase activity strengthens, refinancing demand has cooled slightly, dropping 0.4% for the week. However, refinance applications remain 44% above levels from the same week last year. The refinance share of mortgage activity decreased to 36.4% of total applications from 37.1% the previous week.

Rather than waiting for potential rate decreases, buyers seem increasingly willing to accept today’s higher rate environment. With more homes to choose from and possibly growing concern about continued price appreciation, many are deciding that the right time to buy is when they find the right home — regardless of where rates stand at that moment.

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