With the spring homebuying season underway and the housing market as competitive as ever, mortgage applications took a slight dive this week according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey , dipping 2.5% from one week earlier.
Mortgage rates continue to steadily rise, yet remain in record low territory  as the 30-year fixed mortgage rate increased to 3.36 percent last week, and has now risen 50 basis points since the beginning of 2021, thus shutting off refinance incentives for many borrowers.
The Refinance Index decreased 5% from the previous week, and was 13% lower than the same week one year ago as the nation began a virtual lockdown due to the pandemic. The seasonally-adjusted Purchase Index increased 3% from one week earlier, as the unadjusted Purchase Index increased 3% compared with the previous week and was 26% higher than the same week one year ago.
“Refinance activity dropped to its slowest pace since September 2020, with declines in both conventional and government applications,” said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting . “Mortgage rates have moved higher in tandem with Treasury yields, as the outlook for the U.S. economy continues to improve amidst the faster vaccine rollout and states easing pandemic-related restrictions. Purchase applications were strong over the week, driven both by households seeking more living space and younger households looking to enter homeownership. The purchase index increased for the fourth consecutive week and was up 26% from last year's pace. The average purchase loan balance increased again, both by quickening home-price growth and a rise in higher-balance conventional applications."
Fannie Mae’s Economic and Strategic Research (ESR) Group recently forecast U.S. economic expansion  expected to accelerate this spring, with real GDP growth hitting 8.4% in Q2 and 6.6% for the full year before moderating in 2022.
The rise in rates have changed the minds of many who were going to refinance, however, refis still comprised a major share of total applications, with a 60.9% share this week compared to 62.9% last week.
The FHA share of total applications remained unchanged from 11.7% the week prior. The VA share of total applications decreased slightly to 9.8% from 10.3% the week prior. The USDA share of total applications remained unchanged from 0.4% the week prior.
A supply to demand imbalance remains , as home sellers nationwide are cashing in on all-time high home prices. Home sales prices in February rose more than they have during any month since July 2013, according to a recent Redfin report , with the national median home-sale price rising 14.4% year-over year to $336,200 in February.
"Inadequate housing inventory continues to put upward pressure on home prices,” said Kan. “As both home-price growth and mortgage rates continue this upward trend, we may see affordability challenges become more severe if new and existing supply does not significantly pick up."
NerdWallet recently analyzed home affordability  for first-time buyers in Q4 of 2020, and found that homes remained unaffordable across most of the 50 largest metropolitan areas, despite list prices falling just slightly compared to Q3 2020.