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Mortgage Apps Continue to See-Saw

The rollercoaster ride of mortgage applications continues this week, as the Mortgage Bankers Association (MBA) reports that apps decreased 4.0% from one week earlier, for the week ending July 16, 2021.

The refinance share of mortgage activity increased to 64.9% of total applications from 64.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 3.3% of total applications.

The Refinance Index decreased 3% from the previous week and was 18% lower than the same week one year ago. The seasonally-adjusted Purchase Index decreased 6% from one week earlier. The unadjusted Purchase Index increased 17% compared with the previous week, and was 18% lower than the same week one year ago.

"The 10-year Treasury yield dropped sharply last week, in part due to investors becoming more concerned about the spread of COVID variants, and their impact on global economic growth. There were mixed changes in mortgage rates as a result, with the 30-year fixed rate increasing slightly to 3.11% after two weeks of declines. Other surveyed rates moved lower, with the 15-year fixed rate loan, used by around 20% of refinance borrowers, decreasing to 2.46%—the lowest level since January 2021," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "On a seasonally-adjusted basis compared to the July 4th holiday week, mortgage applications were lower across the board, with purchase applications back to near their lowest levels since May 2020. Limited inventory and higher prices are keeping some prospective homebuyers out of the market. Refinance activity fell over the week, but because rates have stayed relatively low, the pace of applications was close to its highest level since early May."

Although inventory remains tight, housing inventory saw significant recovery for the second consecutive month in June—according to the latest Zillow Real Estate Market Report—indicating that the market may be on the road to rebalancing after a long stint of being heavily in sellers' favor.

"Another month of rising housing inventory gives buyers some additional options, and a little more bargaining power," said Jeff Tucker, Senior Economist at Zillow. "While the level of inventory remains incredibly low by historic norms, it is now on a trajectory that should give buyers reason to hope for a cooldown in price growth this winter, consistent with normal seasonal trends."

Prospective buyers are still struggling with affordability concerns, as a recent Redfin study found that asking prices of newly-listed homes were up 12% from the same time a year ago to a median of $361,700, up 0.5% from the four-week period ending July 4, but down 0.6% from the all-time high two weeks ago.

The MBA also reported this week that the FHA share of total applications increased slightly to 9.6% from 9.5% the week prior. The VA share of total applications also rose marginally as well, to 10.5% from 10.3% the week prior. The USDA share of total applications remained unchanged from 0.5% the week prior.

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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