Purchase Apps Slide to Near-30-Year Low

house model and house key on table

As the fixed-rate mortgage jumped once again, mortgage application volume tailed off, as the latest Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 17, 2023 reported a 13.3% week-over-week dip in app volume.

The jump in rates also impacted those seeking refis, as the MBA’s Refinance Index decreased 2% from the previous week, and was 72% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 18% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week, and was 41% lower than the same week one year ago.

“Mortgage rates increased across all loan types last week, with the 30-year fixed rate jumping 23 basis points to 6.62%–the highest rate since November 2022. The jump led to the purchase applications index decreasing 18% to its lowest level since 1995,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “This time of the year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected. The increase in mortgages rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates.”

The refinance share of mortgage activity increased to 32.5% of total applications from 32% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.6% of total applications.

“Refinance applications declined last week, and remained more than 70% behind last year’s pace,” added Kan. “Given that rates are over 2.5 percentage points higher than a year ago, we expect that refinance activity will remain depressed for some time.”

By loan type, the FHA share of total applications decreased to 12.1% from 12.6% the week prior, while the VA share of total applications decreased to 12.0% from 12.6% the week prior. The USDA share of total applications remained unchanged at 0.6% from the week prior.

Redfin reports that continued low inventory is also contributing to the slump in buyer demand, with prospective sellers also sensitive to rate hikes: 85% of mortgage holders have a rate far below 6% and many of them are eager to hold onto it. Although the decline in new listings of homes for sale has slowed since December, they were still down 17% from a year earlier during the four weeks ending February 12.

“Homes that are priced well are still getting multiple offers, but I did notice buyers making fewer offers this week as interest rates crept back up,” said Los Angeles Redfin Agent Justin Vold. “Buyers have been hypersensitive to rates since the start of the pandemic. In today’s topsy-turvy market, I’m advising people to take a step back from day-to-day rate fluctuations and consider their long-term needs. If someone is planning to stay in a home for many years and they can afford today’s interest rates, now is a perfectly good time to buy because there’s relatively little competition.”