The threat of higher interest rates drove mortgage demand higher in January, with refinancing activity seeing a particularly large gain. A narrowing spread means we expect the upcoming rise in mortgage interest rates will prove temporary, but that won’t be enough to sustain home purchase demand at its current level. Surging house prices and record low inventory will reverse some of last year’s gains, with applications for home purchase likely to drop back by 10% to 15% over 2021.
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