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Mortgage Applications Decline Week-Over-Week

After showing signs of improvement last week, the Mortgage Bankers Association (MBA) has found that mortgage application volume dropped 4% week-over-week, according the latest Weekly Mortgage Applications Survey for the week ending December 10, 2021.

The MBA also reported that the Refinance Index decreased 6% from the previous week, and was an overwhelming 41% lower than the same week just one year ago. The seasonally adjusted Purchase Index increased 1% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week, and was 9% lower than the same week just one year ago.

The refinance share of overall mortgage activity decreased to 63.3% of total applications from 63.9% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.4% of total applications.

"Applications to refinance fell over the week, despite the 30-year fixed rate remaining at 3.30%. With rates more than 40 basis points higher than last year, applications were down 41% on an annual basis. Fewer homeowners have a strong incentive to refinance at current rates," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting.

By loan type, the FHA share of total applications decreased to 9.6% from 9.9% the week prior. The VA share of total apps decreased marginally to 10.6% from 10.7% the week prior. The USDA share of total applications remained unchanged week-over-week from 0.5%.

According to Redfin, there were just 1.38 million homes for sale nationwide in June on a seasonally adjusted basis, further magnifying the inventory shortage. That total marked an all-time low, and was down 23% year-over-year.

Despite the current inventory shortage, combined with inflation concerns, the National Association of Home Builders (NAHB) reports that home builder confidence continues to rise for the fourth consecutive month.

“The most pressing issue for the housing sector remains lack of inventory,” said NAHB Chief Economist Robert Dietz. “Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots. And while 2021 single-family starts are expected to end the year 24% higher than the pre-Covid 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability.”

It was expected that the Federal Reserve announcement of a gradual taper in early November would place upward pressure on mortgage rates, rates have actually climbed at a slower pace than anticipated, still at or around the 3.10% mark, according the latest Primary Mortgage Market Survey (PMMS) from Freddie Mac.

"Purchase activity increased slightly, as a 1.7% rise in conventional applications offset a 1.6% decline in applications for government loans,” added Kan. “The strength in conventional purchase activity continues to support higher loan balances, which moved back over $400,000. Housing demand remains strong as the year comes to an end amidst tight inventory and steep home-price growth."

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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