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Mortgage Apps Slow as Supply Tightens

mortgage applicationThe demand for mortgage apps continues to slide, falling 5.1% from one week earlier according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA).

The seasonally adjusted Purchase Index decreased 5% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week, yet was 51% higher than the same week one year ago.

The refinance share of mortgage activity tailed off slightly to 60.3% of total applications from 60.6% the previous week.

"Mortgage rates resumed their upward move last week, with the 30-year fixed rate at 3.36%. The return of rates to the highest level since last June contributed to a slowdown in applications for both purchases and refinances. The rapidly recovering economy and improving job market is generating sizeable home buying demand, but activity in recent weeks is constrained by quicker home-price growth and extremely low inventory," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Refinance applications declined for the fifth straight week, but there was a gain in VA loan activity. Overall, refinance demand has decreased, with volume over the past 10 weeks down by more than 30%."

In terms of government loans, the FHA share of total applications decreased to 10.2% from 11.3% the week prior. The VA share of total applications increased to 13.8% from 10.3% the week prior. The USDA share of total applications increased to 0.5% from 0.4% the week prior.

Earlier this week, CoreLogic released its Home Price Index (HPI) and HPI Forecast for February 2021 which found that home prices increased 10.4% nationally, compared to February 2020. On a month-over-month basis, home prices increased by 1.2% compared over January 2021.

A rise in prices, along with a shrinking number of homes available and, combined with a rise in rates has created a landscape where more and more Americans are vying for a shrinking piece of the housing pie.

“Rising mortgage rates and severe supply constraints are pushing already-overheated home prices out of reach for some prospective buyers, especially in more expensive metro areas,” said Frank Martell, President and CEO of CoreLogic. “As affordability challenges persist, we may see more potential homebuyers priced out of the market and a possible slowing of price growth on the horizon.”

And as the nation's housing inventory further dwindles, prices are driving upward as builders rush to supplement an already depleted supply of homes.

In a recent report, Black Knight Data & Analytics President Ben Graboske said, “Rather than an influx of homes on the market, we’re now 125,000 fewer new listings in the hole compared to the first two months of 2020 and trending in the wrong direction. With higher interest rates and a continuing shortage of inventory, it will be important to keep a careful eye on both home prices and affordability metrics in the coming months.”

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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