Why purchase application data is up 20% year over year

The MBA Purchase Application report indicates surprising strength in the housing market, showing a 10% week-to-week and 20% year-over-year increase despite elevated mortgage rates; this positive trend, marked by 19 straight weeks of year-over-year growth, suggests resilience even with rates between 6.80% and 7.10%, although volatility caused by tariff-induced yield spikes temporarily dampened growth. The sector anticipates continued year-over-year growth in existing home sales from July to November, and further improvements are expected should mortgage rates decline to between 5.75% and 6.25%.

Analysis

The U.S. housing market is displaying surprising resilience in 2025, with MBA Purchase Application data registering a significant 10% week-over-week and 20% year-over-year increase, despite mortgage rates persisting in the elevated 6.80% to 7.10% range. While the substantial 20% year-over-year growth is partly attributed to a low comparison base from the previous year, the underlying trend remains robust, evidenced by 19 consecutive weeks of positive year-over-year growth, including double-digit increases in the last six weeks. This performance contrasts sharply with 2024, which saw predominantly negative weekly prints and no year-over-year growth under similar rate conditions. A temporary setback occurred earlier in 2025 when tariff concerns, dubbed "Godzilla tariffs," pushed the 10-year Treasury yield towards 4.60%, causing a 0.55% jump in mortgage rates and three weeks of negative application data; however, subsequent market stabilization has improved mortgage spreads. With housing inventory at its lowest level since 2019, the market appears better positioned to manage sales even at current interest rates. As purchase applications are a leading indicator for home sales by 30 to 90 days, an increase in year-over-year existing home sales is anticipated from July through November, suggesting a stronger second half for the housing market, with potential for further acceleration if mortgage rates moderate towards the 5.75%-6.25% range.

Key Decisions for Investors

• Given the persistent strength in purchase application data despite high mortgage rates, investors should reassess any bearish outlooks on the U.S. housing sector and consider potential upside in related equities, particularly if leading indicators suggest mortgage rates could ease.
• Monitor upcoming existing home sales data from July to November closely, as these figures will be crucial in validating the positive trend indicated by purchase applications and could signal sustained demand despite affordability challenges.
• Factor in the impact of historically low housing inventory (lowest since 2019), which, combined with resilient buyer activity, may continue to support home prices and influence the profitability of homebuilders and real estate-linked assets, even if transaction volumes are constrained by supply.