Purchase, Refi Apps Both Show Gains

According to data from the Mortgage Bankers Association (MBA), mortgage applications increased 7.4% from one week earlier, as found by the Weekly Mortgage Applications Survey for the week ending February 3, 2023.

A slide in the fixed-rate mortgage brought about a rise in the MBA’s Refinance Index, as it increased 18% week-over-week, yet was still 75% lower than the same week one year ago.

The MBA’s seasonally adjusted Purchase Index rose 3% from one week earlier. The unadjusted Purchase Index increased 4% compared with the previous week, and was 37% lower than the same week just one year ago.

“Applications rose last week as the 30-year fixed mortgage rate inched lower to 6.18%, its fifth consecutive weekly decline. The 30-year fixed rate is almost a percentage point below its recent high of 7.16% in October 2022,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Both purchase and refinance applications increased last week and have shown gains in three of the past four weeks because of lower rates. Overall applications remained 58% lower than a year ago and rates are still significantly higher, however, this week’s results are a step in the right direction. Purchase activity that was put on hold last year due to the quick runup in rates is gradually coming back as rates ease and housing demand remains strong, driven by supportive demographics and the ongoing strength in the job market.”

The refinance share of mortgage activity increased to 33.9% of total applications, up slightly from 31.2% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to just 6.6% of total applications.

By loan type, the FHA share of total applications decreased slightly to 11.9% from 12% the week prior, while the VA share of total applications increased to 13.4% from 11.9% the week prior. The USDA share of total applications remained unchanged at 0.6% from the week prior.

Realtor.com reports that the nation’s housing market offered homebuyers greater bargaining power in January, as mortgage rates fell to their lowest level in months, and the growth in the typical asking price continued to slow, according to the latest Realtor.com Monthly Housing Trends Report.

Danielle Hale, Chief Economist for Realtor.com, added, "Even as inventories climb and prices moderate, homeowners have equity and advantages in the market but need to set their expectations accordingly. For renters looking to become homeowners this year our Best Markets for First-Time Homebuyers identified pockets of affordability across the country, particularly in the northeast, where they might be able to better overcome affordability challenges and find a better deal."

Realtor.com reported that the share of homes with price reductions increased from 6.0% in January 2022 to 15.3% this year. This number was generally higher than it was before the pandemic, but still slightly lower than 2019 levels (15.6%). In that same time frame, the typical home spent 75 days on the market in January, 13 days longer than last year, but still 16 days faster than 2017-2019, on average.

“The average loan size on a purchase application increased to $428,500–the largest average since May 2022,” noted Kan. “This increase is a sign that the recent upward trend in purchase activity remains skewed toward larger loan sizes and less first-time homebuyer activity, as entry level housing remains undersupplied, and buyers struggle with affordability in many markets.”