Low Rates Breathe Life Into Mortgage Apps

Week-over-week, mortgage applications have risen 2.1%, according to the Mortgage Bankers Association's (MBA) latest Weekly Mortgage Applications Survey.

The Refinance Index increased 3% from the previous week, and was 12% lower than the same week one year ago. The seasonally-adjusted Purchase Index increased 1% from one week earlier, and was 13% higher than the same week one year ago.

The refi share of activity increased to 61.3% of total applications from 61% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 3.8% of total applications.

"Mortgage rates fell last week to the lowest levels since February, tracking the dip in Treasury yields,” said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. “The decline in rates helped the refinance index reach its highest level in eight weeks, driven by a 4% increase in conventional refinances. Additionally, refinance loan balances increased for the fourth straight week, an indication that higher-balance borrowers acted to take quick advantage of lower rates.”

Q1 home sales were strong, despite nearly every metro tracked by the National Association of Realtors (NAR) recording year-over-year price increases.

“The first week of May was also strong for the purchase market. Applications were up 13% from a year ago, which was around the time the housing market awakened from the pandemic-induced stall in activity,” said Kan. “Most markets this spring continue to see robust demand, but activity continues to be constrained by insufficient inventory levels, as well as homebuilder challenges related to the ongoing shortages and price increases for building materials."

Of concern is a recent National Association of Home Builders (NAHB) study concluding that the price of lumber has tripled over the past year, forcing the price of a new single-family home to rise $35,872 on average.

In addition to the rise in price of materials to construct homes, NAHB found that regulations imposed by all levels of government account for $93,870, or 23.8% of the current average sales price ($397,300), of a new single-family home.

On the purchase side, millennials are leading the way according to ICE Mortgage Technology. ICE found that purchase activity represented 51% of loans closed by millennials in March–an increase over February’s 46% purchase share, but on par with January’s activity of 53%. This rise in purchase activity occurred even as interest rates increased to 2.98%, up from 2.88% in February.