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Mortgage Apps Rise, as Affordability Concerns Linger

Is panic setting in among U.S. home buyers and homeowners as rates begin to ascend?

According to the Mortgage Bankers Association (MBA), mortgage application volume rose 2.3% week-over-week for the week ending January 14, 2022.

The latest rise in rates is impacting the Refinance Index, which decreased 3% from the previous week, and was 49% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 8% from one week earlier, while the unadjusted Purchase Index increased 14% compared to the previous week, yet was 13% lower than the same week one year ago.

"Despite the increase in rates, purchase applications jumped almost 8%, with conventional purchase applications accounting for much of the stronger activity,” said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. “The average loan size for a purchase application set a record at $418,500. The continued rise in purchase loan application sizes is driven by high home-price appreciation and the lack of housing inventory on the market—especially for entry-level homes. The slower growth in government purchase activity is also contributing to the larger loan balances and suggests that prospective first-time buyers are struggling to find homes to buy in their price range."

The firm PropertyShark, in a recent survey, reinforced the notion that affordability issues remain, as Millennials have become more pessimistic about their housing options than they were three years ago, while Generation Z’s feelings have also dampened. The survey found that the “Wild Optimism” that Gen Z expressed three years ago about owning a home in the future has yet to come to fruition as only 29% of them have purchased a home thus far. In addition, 38% of Gen Z respondents reported that they were living with their parents.

Fannie Mae’s latest Home Purchase Sentiment Index (HPSI) fell by a slight 0.5 points to 74.2 in December, as consumers differed in opinion on whether it was a good time to buy or sell a home. When combined, these metrics may indicate a slowing of the real estate market as we move into 2022.

The MBA noted that this week, the refi share of mortgage activity decreased to 60.3% of total applications from 64.1% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.8% of total applications.

Meanwhile, the FHA share of total applications decreased slightly to 9.3% from 9.9%t the week prior. The VA share of total applications decreased to 10% from 11.4% the week prior. The USDA share of total applications remained unchanged from 0.4 percent the week prior.

Those who are presently homeowners of at least a decade were said to have gained an average of $225,000 in home equity if the home was sold at the median sales price of $363,100 in Q3 of 2021, according to a recent blog from Scholastica (Gay) Cororaton, Research Economist for the National Association of Realtors (NAR).

A recent Economists' Outlook blog posted by Scholastica (Gay) Cororaton, Research Economist for the National Association of Realtors (NAR), on NAR.com, found that at the national level, homeowners who purchased a single-family existing home 10 years ago have gained an average of $225,000 in home equity if the home was sold at the median sales price of $363,100 in Q3 of 2021. These gains in home equity come from paying down the mortgage and from appreciation in home prices.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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