Surging lock volume may hint at stabilization of the housing market: Optimal Blue 

Mortgage rates continued their downward trajectory at the start of 2024, incentivizing homebuyers to apply for loans. Meanwhile, an easing of the inventory shortage foreshadows the possible return of a stable housing market. 

Lock volume increased by 36% between December and January,  driven by a 38% seasonal increase in purchase lock volume, according to Optimal Blue’s Originations Market Monitor report. Cash-out and rate-and-term refinance volumes rose 30% and 20%, respectively. 

Brennan O’Connell, data solutions manager at Optimal Blue, also noted that January’s year-over-year decline in purchase lock counts, which exclude the impact of changes in home prices, was the lowest seen since May 2022. 

The spread between the 10-year Treasury yield and mortgage rates narrowed to 250 basis points in January, 19 basis points less than a month earlier.

The Optimal Blue Mortgage Market Indices’ 30-year conforming rate dropped 4 basis points in January to reach 6.53%. Meanwhile, rates for Federal Housing Administration (FHA) and U.S. Department of Veteran Affairs (VA) loans also fell in January, while jumbo rates moved up. 

Overall, conforming products gained market share in January, accounting for 57.3% of total volume. Nonconforming products also rose to comprise 9.7% of the total volume. These include jumbo and nonqualified mortgage (non-QM) loans. 

Government-backed loan products posted a setback in market shares in January, with the FHA share dropping to 20.7% and the VA share dropping to 11.7% of total volume. An improving rate environment and an inverted yield curve put a cap on the demand for adjustable-rate mortgages (ARMs) as their market share stayed consistent at slightly more than 5% of total volume.

Each of the top 20 metropolitan statistical areas by share of origination volume experienced monthly increases in rate lock volume. Notably, Las Vegas posted a 90.8% increase in lock volume from December to January. 

The average loan amount rose from $349,500 in December to $355,600 in January. And the average home purchase price increased from $435,900 to $444,900 after six straight months of declines.