Mortgage App Volume Falls to Lowest Level Since 1996

Last minute holiday shopping did not apply to the housing market as the 2022 holiday season came to a close, as the Mortgage Bankers Association (MBA) reported mortgage applications fell 13.2% from two weeks earlier for the week ending December 30, 2022.

The holiday adjusted Refinance Index decreased 16.3% from two weeks ago, and was 87% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 12.2% from two weeks earlier. The unadjusted Purchase Index decreased 38.5% compared to two weeks ago, and was 42% lower than the same week one year ago.

“The end of the year is typically a slower time for the housing market, and with mortgage rates still well above 6% and the threat of a recession looming, mortgage applications continued to decline over the past two weeks to the lowest level since 1996,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Purchase applications have been impacted by slowing home sales in both the new and existing segments of the market. Even as home-price growth slows in many parts of the country, elevated mortgage rates continue to put a strain on affordability and are keeping prospective homebuyers out of the market.”

The slide in overall app volume comes as Freddie Mac reports that the 30-year fixed-rate mortgage (FRM) rose for the first time in seven weeks last week, rising 15 basis points to 6.42% over the previous week’s reading of 6.27%. A year ago at this time, the 30-year FRM averaged 3.11%.

The MBA also reported that the refinance share of mortgage activity increased to 30.3% of total applications, up from 28.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to just 7.3% of total applications.

“Refinance applications remain less than a third of the market and were 87% lower than a year ago as rates remained close to double what they were in 2021,” added Kan. “Mortgage rates are lower than October 2022 highs, but would have to decline substantially to generate additional refinance activity.”

By loan type, the FHA share of total applications increased to 14% from 13.1% the week prior. The VA share of total applications increased to 13.4% from 12% the week prior. The USDA share of total applications remained unchanged at just 0.6%.

Redfin recently reported that the total number of homes for sale rose 18% from a year earlier during the four weeks ending December 25, the biggest increase since at least 2015. As rates fell in early December 2022, housing inventory rose nationwide, although new listings were down by double digits, due to homes taking a long time to sell amid 6%-plus mortgage rates—the average 30-year rate ticked up to 6.42% this week—economic uncertainty and the typically slow holiday season. Redfin reported the typical home was on the market for 40 days before going under contract, more than double the record low of 18 days set in May and the slowest pace since January 2021. Just 28% of homes went under contract within two weeks, the lowest share recorded by Redfin since January 2020.