Mortgage Applications Down
Despite Rise in Inventory, Mortgage Application Volume Declines
The MBA’s Market Composite Index, a measure of mortgage loan application volume, decreased 1.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3% compared with the previous week. The Refinance Index decreased 3% from the previous week and was 4% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 0.2% from one week earlier. The unadjusted Purchase Index decreased 3% compared with the previous week, 18% lower than the same week one year ago.
The refinance share of mortgage activity remained the same as the previous week at 66.8%, while the share of adjustable-rate mortgage (ARM) activity decreased to 2.5 percent of total applications.
“Mortgage application volume fell last week to its lowest level since mid-July, as mortgage rates have stayed just above 3% for several weeks. Refinance volume has been moderating, while purchase volume continues to be lower than expected given the lack of homes on the market,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Economic data has sent mixed signals, with slower job growth but a further drop in the unemployment rate in August. We expect that further improvements will lead to a tapering of Fed MBS purchases by the end of the year, which should put some upward pressure on mortgage rates.”
According to the Realtor.com’s Monthly Housing Report for August 2021, inventory and new listings improved during the month, as 432,000 newly-listed homes hit the market, a 4.3% rise in inventory year-over-year. U.S. housing inventory declined 25.8% year-over-year in August to close out Q3, an improvement over July’s decline of 33.5%.
“Low mortgage rates have motivated homebuyers to endure this year’s challenging market and now some buyers are starting to see their persistence pay off,” said Realtor.com Chief Economist Danielle Hale. “This month, new sellers added more affordable entry-level homes to the market compared to last year, while others began adjusting listing prices to better compete with an uptick in inventory.”
By loan type, the FHA share of total applications decreased to 10.9% from 11.2% the week prior. The VA share of total applications increased to 10.4% from 9.7% the week prior, while the USDA share of total applications remained unchanged from 0.5% the week prior.
CoreLogic’s latest Home Price Index (HPI) and HPI Forecast found that despite mortgage rates at near record lows, the ongoing challenges of persistent demand, a rebounding economy, and constricted supply continue to put upward pressure on home prices, forcing home prices to rise 18% on average across the nation.
“Home price appreciation continues to escalate as millennials entering their prime homebuying years, renters looking to escape skyrocketing rents and deep pocketed investors drive demand,” said Frank Martell, President and CEO of CoreLogic.
However, that upward pressure on pricing seems to be easing, as the Biden Administration’s early-September announcement related to increasing affordable housing in America may impact the market in the months to come.
“While properties across the U.S. continue to sell at record high prices, our latest data reveals that the breakneck pace of housing price growth has likely seen its peak and we expect it to decline in the coming months,” said Jeremy Sicklick, Co-Founder and CEO of HouseCanary.
Optimism in inventory was seen by Sicklick in HouseCanary’s newest report, which found that since August 2020, there have been 3,181,376 net new listings placed on the market, an 11.2% increase versus the same period in 2019. When broken down by home price, 18.6% of new listings are homes in the $0-$200,000 range, 41.5% are in the $200,000-$400,000 range, 20.3% are in the $400,000-$600,000 range, 13% are in the $600,000 to $1 million range, and 6.6% are homes were priced in excess of $1 million.
Another sign of life in the economy came last week from the Bureau of Labor Statistics (BLS) which found that in August 2021, total non-farm payroll employment rose by 235,000 in August, and the unemployment rate dropped by 0.2 percentage point to 5.2%. So far this year, monthly job growth has averaged 586,000, with notable job gains found in August in professional and business services, transportation and warehousing, private education, manufacturing, and other services.
Mortgage Applications Down
Mortgage applications slid 4% on a week-over-week, seasonally adjusted basis in the week ended July 16, while the average 30-year fixed mortgage rate ticked up to 3.11% from 3.09%, the Mortgage Bankers Association said, citing its Market Composite Index.
On an unadjusted basis, the index jumped 20%. The previous week’s adjusted results include an adjustment for the Fourth of July holiday, the association said in a press release.
The refinance index, meanwhile, slid 3% from the previous week and was down 18% from the same week a year ago.
The seasonally adjusted purchase index declined 6% from the previous week, while the unadjusted purchase index was down 17% on a weekly basis and down 18% on yearly basis.
“The 10-year Treasury yield dropped sharply last week, in part due to investors becoming more concerned about the spread of COVID variants and their impact on global economic growth,” MBA Associate Vice President of Economic and Industry Forecasting Joel Kan said in a release. “There were mixed changes in mortgage rates as a result, with the 30-year fixed rate increasing slightly to 3.11% after two weeks of declines.”
Kan noted that on a seasonally adjusted basis compared to preceding week, mortgage applications were lower across the board, with applications near their lowest levels since May 2020.
“Limited inventory and higher prices are keeping some prospective homebuyers out of the market,” Kan said. “Refinance activity fell over the week, but because rates have stayed relatively low, the pace of applications was close to its highest level since early May.
Mortgage Applications down
- The average rate for 30-year fixed loans increased slightly to 3.11% after two weeks of declines.
- The 15-year fixed-rate loan decreased to 2.46%, the lowest level since January.
- Applications to refinance a home loan fell 3% for the week and were 18% lower than a year ago.
Mortgage rates have been on a roller coaster
Mortgage rates have been on a roller coaster lately, albeit a low-riding one. A mixed picture of rates last week, though, was enough to put the brakes on a recent rise in refinance demand.
The average rate for 30-year fixed loans with conforming balances and a 20% down payment increased slightly to 3.11% from 3.09% after two weeks of declines, according to the Mortgage Bankers Association. The 15-year fixed rate loan, used by about 1 in 5 refinance borrowers, decreased to 2.46%, the lowest level since January.
Applications to refinance a home loan fell
As a result, applications to refinance a home loan fell a seasonally adjusted 3% last week and were 18% lower than year ago. Refinance demand has been lower on an annual basis for a while because interest rates hit more than a dozen record lows last year, resulting in soaring refinance demand.
Mortgage applications to purchase a home fell 6% last week and were 18% lower year over year. High home prices are sidelining some buyers, and while the number of new listings is finally rising, the supply of homes for sale is still historically low, especially so in the more affordable categories.
Mortgage rates fell more sharply to start this week, after a major stock market sell-off Monday. Concerns over the delta variant and news of Olympic athletes and Major League Baseball players testing positive sent investors rushing to the relative safety of the bond market.
Refinances could get a boost going forward, after mortgage giants Fannie Mae and Freddie Mac last Friday announced they were removing an adverse market fee charged to lenders for all refinances. The fee was put in place at the start of the pandemic and was passed on to borrowers, so its removal could now be a source of more savings.
The Mortgage Bankers Association’s Market Composite Index — a measure of loan application volume — fell 2.2% from the week before on a seasonally adjusted basis, with the refinance segment dropping 4% week-over-week and 39% year-over-year.
It marks the lowest point for the refi index since September 2020. The refi share of application activity also fell weekly to 62.9% from 64.5%. However, the purchase application index grew in contrast, climbing 2% on a seasonally adjusted basis over last week. Unadjusted, purchases rose 3% from the previous week and by 5% annually.
The average for the 30-year fixed rate mortgage increased to its highest level since June 2020, having surged 36 basis points from the beginning of February.
The adjustable-rate mortgage share of activity dipped to 2.7% from 3% the week before. By product type, Federal Housing Administration mortgages made up 11.7% of this week’s applications, up slightly from 11.6% week-over-week, with Veterans Affairs loans decreasing to 10.3% from 11.1% while the U.S. Department of Agriculture/Rural Housing Service share remained at 0.4%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances — $548,250 or less — rose to 3.28% from 3.26%.
The average contract interest rate for jumbo loans — those over $548,250 in value — held at 3.34%. The average contract interest rate for the 30-year FHA-insured mortgage jumped to 3.25% from 3.2%.
The average contract interest rate for 15-year FRMs increased to 2.67% from 2.63% and the average contract interest rate for 5/1 ARMs spiked to 2.82% from 2.69%, with points falling to 0.3 from 0.37.
The volume of mortgage applications declined 2.5 percent for the week ending Sept. 11, 2020, according to the Mortgage Bankers Association’s (MBA) weekly survey. The data included an adjustment for the Labor Day holiday.
On an unadjusted basis, the market composite index, which measures mortgage loan application volume, decreased 13 percent compared to the previous week. The refinance index declined 4 percent from the previous week but increased 30 percent year-over-year.
The seasonally adjusted purchase index decreased 1 percent from the week before while the unadjusted purchase index dropped 12 percent from the week prior and rose 6 percent year-over-year.
Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. “A 5 percent decline in conventional refinances pulled theoverall index lower, but activity was still 30 percent higher than last year. With the flurry of refinancing activity reported over the past several months, demand may be slowing as remaining borrowers in the market potentially wait for another sizeable drop in rates.”
Hmm…can we thank the expiration of the government tax credit for this drop?
Some would claim that the tax credit did boost housing activity. But others might argue that all it did was pull forward sales transactions, so it didn’t add much new volume into the system. Net result: taxpayers’ money is transferred to homebuyers, but no new real activity in the marketplace.
What am I seeing? One metric that I use (not very scientific) is that I can get a good idea what future sales will look like based on my internet sales leads. I hope this unproven sales analysis stays unproven because I have seen a major drop off on internet sales leads in the last two weeks.
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