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Slumping Refi Streak Continues for Seventh Straight Week

Despite mortgage rates creeping back below the 3% mark, the Mortgage Bankers Association (MBA) found mortgage application volume slid 2.8% week-over-week, for the week ending November 12, 2021.

The Refinance Index continued to decline, falling 5% week-over-week, and down 31% from the same week one year ago. The MBA’s seasonally adjusted Purchase Index increased 2% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week, and was 6% lower than the same week one year ago.

"Refinance applications decreased for the seventh time in eight weeks, as mortgage rates moved higher after two weeks of declines. Activity has been particularly sensitive to rate movements, and last week's decline was driven by a drop in conventional and FHA refinance applications, which offset an increase in VA refinance applications,” said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting.

The refinance share of overall mortgage activity decreased slightly to 62.9% of total applications, from 63.5% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.2% of total applications.

By loan type, the FHA share of total applications increased slightly to 8.9% from 8.8% the week prior. The VA share of total applications increased to 10.8% from 10.2% the week prior. The USDA share of total applications remained unchanged from 0.5% the week prior.

"Purchase applications increased for both conventional and government loan segments, as housing demand continues to show resiliency at a time—late fall—when home buying activity typically slows,” noted Kan. “The second straight increase in purchase applications suggests that stronger sales activity may continue in the weeks to come. Despite elevated demand, purchase applications were 5.7% lower than a year ago."

Earlier this week, Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), issued his annual forecast, explaining that the housing market, while experiencing 15-year highs that will continue through the close of the year, will taper off through 2022.

"The housing sector's success will continue, but I don't expect next year's performance to exceed this year's," said Yun.

While inventory is current at low levels nationwide, new home construction is on the rise after a prolonged delay due to supply chain issues. Also factoring into the increase in inventory is the expiration of forbearance plans for many, as some homeowners will be forced to sell their homes.

Recent data issued by Black Knight found that the number of loans in active forbearance fell by 123,000 or 10.8%, and as of November 9, 1.01 million mortgage holders remained in pandemic-related forbearance plans, approximately 1.9% of all active mortgages.

"With more housing inventory to hit the market, the intense multiple offers will start to ease," Yun said. "Home prices will continue to rise, but at a slower pace."

Furthering the affordability dilemma for prospective buyers is the rapid rate at which U.S. home prices are climbing, as Radian’s Home Price Index for the month of September found that U.S. home prices appreciated at an annualized rate of 17.6% from the prior month, marking the sixth consecutive month of reporting all-time record month-over-month rate increases.

“While there are some indications that affordability may be starting to place strain on certain home buyers, the limited supply is a strong support for home price growth.” said Steve Gaenzler, CFA, SVP of Data and Analytics for Radian. “Ultimately, while bidding wars may be reducing in frequency, sellers are still receiving above list price offers in many situations.”

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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