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Purchase Volume and Refis Tail Off

Mortgage applications slid slightly this week, dropping 3.1% from the previous week, as found by the Mortgage Bankers Association’s (MBA) latest Weekly Mortgage Applications Survey. This week's results include an adjustment for last week’s Memorial Day holiday.

The Refinance Index decreased 5% from the previous week and was 27% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 0.3% from one week earlier, while the unadjusted Purchase Index decreased 11% compared with the previous week and was 24% lower than the same week one year ago.

"Most of the decline in mortgage rates came late last week, with the 30-year fixed-rate mortgage declining to 3.15%. This likely impacted refinance applications, which fell 5% for both conventional and government loans. With fewer homeowners able to take advantage of lower rates, the refinance share dipped to the lowest level since April," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "Purchase applications were up slightly last week, and the large annual decline was the result of Memorial Day 2021 being compared to a non-holiday week, as well as the big upswing in applications seen last May once pandemic-induced lockdowns started to lift."

The refinance share of mortgage activity decreased to 60.4% of total applications from 61.3% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.9% of total applications.

The FHA share of total applications decreased to 9.5% from 9.6% the week prior. The VA share of total applications increased to 11.2% from 10.9% the week prior. The USDA share of total applications remained unchanged at 0.4% the week prior.

High prices and low inventory may be keeping more away from locking in near-3% rates and landing in that home of their dreams, as the latest Fannie Mae Home Purchase Sentiment Index (HPSI) leveled off in May, increasing by just 1.0 point to 80.0. Four of the HPSI’s six components increased month-over-month, most notably the components related to personal finance, as consumers reported a greater sense of job security and improved household income compared to the same time last year at the height of the pandemic.

Doug Duncan, SVP and Chief Economist for Fannie Mae, said, “The ‘good time to buy’ component fell further—hitting another all-time survey low—as consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment. However, despite the challenging buying conditions, consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates, as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment.”

U.S. median home prices continued a trend of double-digit appreciation in May, reaching a new all-time high of $380,000, according to Realtor.com, up 15.2% year-over-year.

“Home-price growth continues to accelerate, driven by favorable demographics, the recovering job market and economy, and housing demand far outpacing supply,” 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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