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Purchase and Refi Apps Continue to Tumble

Mortgage application volume dipped slightly week-over-week, falling just 0.7% for the week ending February 25, 2022, according to the Mortgage Bankers Association (MBA) Weekly Mortgage Applications Survey.

The MBA’s Refinance Index increased just 1% from the previous week and was 56% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2% from one week earlier, while the unadjusted Purchase Index increased 1% compared with the previous week, and was 9% lower than the same week one year ago.

"Mortgage rates last week reached multi-year highs, putting a damper on applications activity. The 30-year fixed rate reached its highest level since 2019 at 4.15%, and the refinance share of applications dipped below 50%,” said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting.

Despite the slight drop off in mortgage rates last week, refinance activity continues to dip, falling this week to a share of just 49.9% of total applications from 50.1% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.3% of total applications.

“Although there was an increase in government refinance applications, higher rates continue to push potential refinance borrowers out of the market," said Kan. "Purchase activity remained weak, but the average loan size increased again, which indicates that home-price growth remains strong, and a greater share of the activity is occurring at the higher end of the market."

CoreLogic’s latest Home Price Insights (HPI) report found that home prices nationwide increased 19.1% year-over-year in January, and on a month-over-month basis, rose by 1.4% in January 2022 compared to December 2021.

Prices remain at all-time highs as nationwide housing inventory continues to suffer, with Redfin recently reporting that active listings—the number of homes listed for sale at any point—fell 25% year-over-year, dropping to an all-time low of 452,000 during the four weeks ending February 20. Listings were down 49% from the same period in 2020.

“In December and January, for-sale inventory continued to be the lowest we have seen in a generation,” said Dr. Frank Nothaft, Chief Economist for CoreLogic. “Buyers have continued to bid prices up for the limited supply on the market. However, the rise in mortgage rates since January further eroded buyer affordability and is expected to slow price gains in coming months.”

By loan type, the MBA reported that the FHA share of total applications decreased slightly to 8.6% from 8.7% the week prior, while the VA share of total apps rose to 10.2% from 9.9% the week prior. The USDA share of total applications remained unchanged at 0.4% from the week prior.

Improvements were reported in the employment sector, as the Bureau of Labor Statistics (BLS) released its study of 2021, which found that over the year, annual average unemployment rates decreased in 49 states and the District of Columbia, while the rate was little changed in just one state. Unemployment rates decreased from 2020 in all four regions: the Northeast (-2.9 percentage points), the Midwest and West (-2.8 points each), and the South (-2.4 points).

One factor that may come into play is the Ukrainian invasion, which may further disrupt international sanctions and their impact on the supply chain.

The latest Producer Price Index (PPI) report from the BLS found the price of softwood lumber (seasonally adjusted) increased 25.4% in January 2022, following a 21.3% increase the month prior. Since reaching its most recent trough in September 2021, prices have increased 73.9%. According to Random Lengths data, the “mill price” of framing lumber has more than tripled since late August.

"We will continue to assess the potential impact on mortgage demand from the sharp drop in interest rates this week due to the invasion of Ukraine,” said Kan.

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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