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Mortgage Apps Rebound After Down Week

According the Mortgage Bankers Association’s (MBA) latest Weekly Mortgage Applications Survey, mortgage applications increased 1.6% over last week’s totals.

The Market Composite Index, a measure of mortgage loan application volume, increased 1.6% on a seasonally-adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1% compared to the previous week.

The Refinance Index increased 1% from the previous week and was 3% higher than the same week one year ago. The seasonally adjusted Purchase Index increased 3% from one week earlier. The unadjusted Purchase Index increased 1% compared with the previous week and was 16% lower than the same week one year ago.

"Treasury yields feel last week, as investors continue to anxiously monitor if the rise in COVID-19 cases in several states starts to dampen economic activity,” said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting.

The refinance share of mortgage activity remained unchanged from the previous week at 67.3% of total applications, while the adjustable-rate mortgage (ARM) share of activity decreased to 3.1% of total applications.

“Mortgage rates slightly declined as a result, with the 30-year fixed rate decreasing for the first time in three weeks,” said Kan. “Lower rates led to an increase in refinance applications, with government loan applications jumping 10% to the highest level since May 2021. Purchase applications for both conventional and government loans also increased. The Purchase Index was at its highest level since early July, despite still continuing to lag 2020's pace. There was also some easing in average loan sizes, which is potentially a sign that more first-time buyers looking for lower-priced homes are being helped by the recent uptick in for-sale inventory for both newly built homes and existing homes."

Redfin recently found that the median home price once again hit an all-time high in July, reaching $385,600, a 20% annual increase.

"Now that we're a year out from the post-lockdown rebound, we can no longer explain away the enormous price growth by pointing to the pandemic's earliest impacts on the housing market,” said Redfin Chief Economist Daryl Fairweather. “While this ongoing trend continues to fuel an already severe affordability crisis, the market is becoming somewhat less competitive for homebuyers. Demand has softened enough that homes aren't flying off the market quite as fast or for as much above list price as they were in the spring. Mortgage rates are remaining about as low as they've ever been, so buyers who lose out in a bidding war don't have to fear that they've missed their window to buy. As more homes are being listed, it may be worth waiting for the right home at the right price."

RE/MAX, in its National Housing Report for July 2021, also found that despite continued high demand, July inventory climbed 4.0% from June 2021, marking the first two consecutive months of month-over-month inventory gains since April and May 2019.

High prices are simply sending prospective buyers back to the drawing board, as they are choosing not to give into record-high prices and are choosing to avoid bidding wars for these properties, thus boosting the nation’s housing inventory.

"The month-over-month gain in inventory, extending a short trend that started in June, was great news–even though the shortage of listings remains a major challenge," said Nick Bailey, President of RE/MAX LLC. "Some buyers have stepped away in light of high prices, seller expectations, multiple offers and intense competition, but new listings are still selling quickly. Clearly, the demand is still there. The market should continue to run hot, especially if interest rates remain low, prices stabilize a bit, and more sellers jump in to take advantage."

In terms of loan types, the MBA reported the FHA share of total applications increased to 11% from 9.4% the week prior, while the VA share of total applications decreased to 10% from 10.3% the week prior, and the USDA share of total applications remained unchanged from 0.4% 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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