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Purchase Apps Fall, Refi Apps Level Off

Mortgage applications decreased 1.7% from one week earlier, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA) for the week ending July 30, 2021.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.7% on a seasonally-adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2% compared to the previous week. The Refinance Index decreased 2% from the previous week, and was 3% lower than the same week one year ago. The seasonally-adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index decreased 2% compared to the previous week, and was 18% lower than the same week one year ago.

"Interest rates drifted lower globally last week, as markets assessed the latest concerns regarding the delta variant,” said Mike Fratantoni, MBA's SVP and Chief Economist. “Thirty-year mortgage rates dropped below 3% in our survey for the first time since this February, presenting an opportunity for many homeowners who have not yet refinanced to lower their rate and their payments. Refinance application volume slightly decreased, following an 11% jump last week. Purchase application volume decreased again, reflecting the ongoing lack of inventory that continues to drive rapid home-price appreciation across the country."

That appreciation and tight inventory is forcing prospective buyers back to the sidelines, as the latest Housing Trends Report (HTR) from the National Association of Home Builders (NAHB) found that 64% of prospective homebuyers in Q2 of 2021 expect that finding the right home will be harder in the months ahead, compared to 54% in Q4 of 2020. Expectations that finding a home would be easier in the months ahead dropped in all four U.S. regions (North, South, East, and West) between Q1 of 2020 and Q2 of 2021.

Affordability issues remain as well, as the NAHB has estimated that changes in prices for softwood lumber products that occurred between April 17, 2020 and July 8, 2021 have added $29,833 to the price of an average new single-family home.

However, home sellers continue to profit, as Redfin reports asking prices of newly-listed homes were up 12% from the same time a year ago to a median of $357,975, down 1.2% from their all-time high posted four weeks earlier.

"Asking prices are still high, but the share of listings with price drops is rising steadily and could soon reach pre-pandemic levels," said Redfin Chief Economist Daryl Fairweather. "That's an early indication that we are past the peak for this intense seller's market. Buyers may begin to regain some negotiating power on properties that have been on the market for more than a week."

The refi share of mortgage activity increased slightly to 67.6% of total applications from 67.5% the previous week, while the adjustable-rate mortgage (ARM) share of activity decreased to 3.4% of total applications. The FHA share of total applications remained unchanged at 9% from the week prior, while the VA share of total applications increased to 9.9% from 9.7% the week prior. The USDA share of total applications remained stable at 0.5% from 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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