Mortgage applications increased 16.0% over last week [1], according to the latest Weekly Mortgage Applications Survey [2] from the Mortgage Bankers Association (MBA) for the week ending July 9, 2021. This week's results include an adjustment for the Fourth of July holiday.
The Survey’s Refinance Index increased 20% over the previous week, but was 29% lower than the same week one year ago. The seasonally-adjusted Purchase Index increased 8% from one week earlier. The unadjusted Purchase Index decreased 13% compared to the previous week, and was 29% lower than the same week one year ago.
"Overall applications climbed last week, driven heavily by increased refinancing, as rates dipped again [3]. Treasury yields have trended lower over the past month as investors remained concerned about the COVID-19 variant and slowing economic growth," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "Mortgage rates fell for the second consecutive week as a result, with the 30-year fixed rate hitting 3.09%, its lowest level since February 2021. Refinance applications increased over 20% last week after adjusting for the July 4th holiday, aided by a 23% increase in conventional refinance applications. Also, there may have been a delayed spillover of applications from the previous week, when rates also decreased, but there was not much of response in terms of refinance applications."
In terms of application type, the refinance share of mortgage activity increased to 64.1% of total application volume from 61.6% the previous week.
The FHA share of total applications decreased to 9.5% from 9.8% the week prior, while the VA share of total applications decreased to 10.3% from 10.8% the week prior. The USDA share of total applications remained unchanged from 0.5% the week prior.
"Purchase applications increased last week, but average loan sizes decreased to their lowest level since January 2021,” said Kan. “We continue to see ebbs and flows as housing demand remains strong but, for-sale inventory remains low. However, lower rates may be helping some home buyers close on their purchases, especially first-time home buyers. The year-over-year comparisons were down significantly for both purchase and refinance applications, as they were relative to a non-holiday week in 2020."
Low for-sale inventory is still driving prices, however fierce bidding wars are slowing down a bit, according to a new analysis by Redfin [4]. In June 2021, 65% of home offers written by Redfin agents faced competition, down from a revised rate of 72.1% in May, and a pandemic peak of 74.1% in April. Year-over-year, the rate of bidding wars was up over June 2020’s rate of 56.8%. Redfin found that buyer fatigue has been a factor pushing down the competition rate, with some house hunters moving to the sidelines after repeatedly losing bidding war after bidding war.
Millennials are continuing to drive the market, as the percentage of purchase activity to total closed loans among applicants born 1980-1999 increased for the third consecutive month, according to a recent analysis from ICE Mortgage Technology [5]. The study found that in May, 67% of loans closed by millennials on the Encompass by ICE Mortgage Technology origination platform were for purchases, up from 61% in April 2021 and 51% in March 2021. The average purchase loan amount for this demographic was $220,279.