According to the latest Weekly Mortgage Applications Survey [1] from the Mortgage Bankers Association (MBA) [2], mortgage applications decreased 1.8% week-over-week for the week ending July 2, 2021. The refinance share of mortgage activity decreased slightly as well to 61.6% of total applications from 61.9% the previous week.
Rising slightly was the FHA share of total applications, increasing to 9.8% from 9.5% the week prior. The VA share of total applications also increased to 10.8% from 10.5% the week prior. The USDA share of total applications remained unchanged from 0.5% the week prior.
"Mortgage application activity fell for the second week in a row, reaching the lowest level since the beginning of 2020,” said Joel Kan [3], MBA's Associate VP of Economic and Industry Forecasting. “Even as mortgage rates declined, with the 30-year fixed rate dropping five basis points to 3.15%, both purchase and refinance applications decreased. Treasury yields have been volatile despite mostly positive economic news, including last week's June jobs report, which showed ongoing improvements in the labor market. However, rates continued to move lower—especially late in the week. The 30-year fixed rate was 11 basis points lower than the same week a year ago, but many borrowers previously refinanced at even lower rates. Refinance applications have trended lower than 2020 levels for the past four months."
Last week, the Bureau of Labor Statistics (BLS) reported [4] that the American economy added 850,000 jobs in the month of June, while the U.S. Department of Labor reported [5] that, for the week ending June 26, the advance figure for seasonally adjusted initial unemployment claims was 364,000, a decrease of 51,000 from the previous week's revised level. This marked the lowest level for initial claims since March 14, 2020 when unemployment claims stood at 256,000 nationwide.
The slight drop in mortgage applications coincides with the latest findings from Fannie Mae in their latest Home Purchase Sentiment Index (HPSI) [6], which decreased by 0.3 points in June to 79.7, up 3.2 points compared to the same time last year. The HPSI measures consumer sentiment regarding the housing market, and for June 2021, 64% of respondents said it was a bad time to buy a home, up from 56% last month.
Prospective homebuyers are simply being priced out of the market, as CoreLogic’s latest Home Price Index (HPI) and HPI Forecast for May 2021 [7] has found that home prices increased 15.4% in May 2021, compared to May 2020, and month-over-month, rose by 2.3% compared to April 2021’s findings.
"Swift home-price growth across much of the country, driven by insufficient housing supply, is weighing on the purchase market and is pushing average loan amounts higher,” added Kan.