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Mortgage Application Volume Rebounds

According to the Mortgage Bankers Association (MBA), prospective buyers are once again emerging from the shadows, as mortgage application volume is on the rise after several weeks of decline, rising 6.6% over last week’s totals. Note that last week’s results have been adjusted to account for the Memorial Day holiday.

After mortgage app volume hit a 22-year low last week, the MBA’s Refinance Index rose 4% from the previous week, and was 76% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 8% from one week earlier. The unadjusted Purchase Index increased 18%, compared with the previous week, and was 16% lower than the same week one year ago.

After two weeks of declines, Freddie Mac reported that the 30-year fixed-rate mortgage (FRM) averaged 5.23% for the week ending June 9, 2022, up week-over-week when it averaged 5.09%.

Joel Kan, MBA’s Associate VP of Economic and Industry Forecasting, commented, “Despite the increase in rates, application activity rebounded following the Memorial Day holiday week, but remained 0.29% below pre-holiday levels. With mortgage rates well above 5%, refinance activity continues to run more than 70% lower than last year.”

As rates begin to ascend once again, more and more are dismissing refis as an option, as the MBA reported the refinance share of mortgage activity decreasing to 31.7% of total applications this week, down slightly from 32.2% the previous week.

And adjustable-rate mortgage (ARM) products too are in less demand, as the share of ARM activity this week decreased to 8.1% of total mortgage applications.

And as the forces of affordability continue to wage their war on the nation’s bank accounts, the Fed took action today in the way of a rate hike in an attempt to quell inflationary concerns, the largest rate hike seen since November 15, 1994 when rates were upped to 5.5%.

“Today’s announcement by the Federal Reserve set a big increase in interest rates, and means several more rounds of rate hikes are on the way in upcoming months,” said National Association of Realtors (NAR) Chief Economist Lawrence Yun. “So far, the short-term fed funds rate that the Fed directly controls has risen by 175 basis points. But the 30-year fixed rate mortgage has risen even more–by nearly 300 basis points. On the same $300,000 mortgage, the monthly payment has risen from $1,265 in December to $1,800 today. That’s painful and, consequently, will shrink the buyer pool. Home sales have recently been trending down towards 2019 figures. Sales could fall even further with some inventory sitting on the market for more than a month like in the pre-pandemic days. Pricing a listed home properly will, therefore, be the key to attracting buyers. In the meantime, rental demand will strengthen along with rents. Only when consumer price inflation tops out and starts to fall will mortgage rates stabilize or even decline a bit. That is why providing additional oil supplies will be critical in containing consumer prices and interest rates.”

By loan type this week, the MBA reported the FHA share of total applications increased to 11.8%, up slightly from 11.3% the week prior, as the VA share of total applications increased slightly as well to 11.7%, up from 11.4% the week prior. The USDA share of total applications increased minimally to 0.6%, up from 0.5% the week prior.

But still the same factors of rates, high ticket prices and short supply still pose an issue for many, but is the market cooling to a point where relief is in sight?

“The housing market is incredibly rate-sensitive, so as mortgage rates increase suddenly, demand again is pulling back,” said Sam Khater, Freddie Mac’s Chief Economist. “The material decline in purchase activity, combined with the rising supply of homes for sale, will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in purchasing a home.”

Until then, its business as usual in a volatile marketplace.

“Purchase applications were down more than 15% compared to last year, as ongoing inventory shortages and affordability challenges have cooled demand, coinciding with the rapid jump in mortgage rates,” 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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