Mortgage demand from home buyers has been falling for weeks and continued its slide yet again. That caused a 0.2 percent drop in total mortgage application volume, seasonally adjusted, last week compared to the previous week. Volume was 12.6 percent lower than the same week one year ago, according to the Mortgage Bankers Association.
Potential home buyers are coming up against high prices and meager supply, although more supply is slowly trickling back onto the market this summer. Affordability, however, is weakening, and fewer buyers have the means to buy what they like where they like it.
Mortgage applications to purchase a home fell one percent for the week to the lowest level since May. Purchase volume was, however, 2 percent higher compared to a year ago. Given the increase in supply, noted by the National Association of Realtors in a report this week, purchase demand should be rising more.
Applications to refinance a home loan did gain one percent for the week but were 30 percent lower than the same week one year ago, when the average rate on the 30-year fixed mortgage was 60 basis points lower.
The refinance share of mortgage activity increased to 36.8 percent of total applications from 36.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity also increased slightly. Borrowers often turn to ARMs when home prices are higher because ARMs can offer lower interest rates.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged at 4.77 percent, with points decreasing to 0.45 from 0.46 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate remained unchanged from last week.
“It was a mixed week in MBA’s survey,” noted Joel Kan, MBA Associate VP of Economic and Industry Forecasting. “Treasury yields were up slightly thanks to the Fed signaling more rate hikes this year, the strong economy, and low unemployment. But continuing trade tensions between the US and China kept Treasury rates down, which meant mortgage rates were unchanged from the week before.”
Mortgage rates have been stuck in a rut for more than a month, but could now be poised to move higher. Treasury yields moved sharply higher to start this week, after President Donald Trump suggested that the Federal Reserve’s strategy of raising rates could hurt the U.S. economy. Mortgage rates loosely follow the yield on the 10-year. The average rate on the 30-year fixed moved 9 basis points higher in the past two days, according to Mortgage News Daily. Markets then settled, but rates did not drop.
“While the market stability is a potential early indication that this rate spike has run its course, it’s too soon to bank on it,” noted Matthew Graham, chief operating officer of Mortgage News Daily. “There are past examples where we’ve had a quick little market recovery like [Tuesday] only for things to get worse in subsequent days.”
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