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Mortgage Purchase Apps Fall 44% YoY

As the fixed-rate mortgage (FRM) took a giant leap last week, the Mortgage Bankers Association (MBA) reported mortgage application volume continued to tumble, dipping 5.7% from one week earlier, according to the MBA’s latest Weekly Mortgage Applications Survey for the week ending February 24, 2023.

The MBA’s Refinance Index also fell, decreasing 6% from the previous week, and was 74% lower than the same week one year ago. The seasonally adjusted Purchase Index fell 6% from one week earlier. The unadjusted Purchase Index decreased 3% compared to the previous week, and was 44% lower than the same week one year ago.

“The 30-year fixed rate increased to 6.71% last week, the highest rate since November 2022, which drove a 6% drop in applications. After a brief revival in application activity in January when mortgage rates dropped to 6.2%, there has now been three straight weeks of declines in applications as mortgage rates have jumped 50-basis points over the past month,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Data on inflation, employment, and economic activity have signaled that inflation may not be cooling as quickly as anticipated, which continues to put upward pressure on rates.”

The MBA reports that the refinance share of mortgage activity decreased to 31.8% of total applications, down from 32.5% the previous week, while the adjustable-rate mortgage (ARM) share of activity increased to 8.1% of total applications.

“Both purchase and refinance applications declined last week, with purchase index at a 28-year low for a second consecutive week,” noted Kan. “Purchase applications were 44% lower than a year ago, as homebuyers again retreat to the sidelines as higher rates crimp affordability. Refinance applications account for less than a third of all applications, and remained more than 70% behind last year’s pace, as a majority of homeowners are already locked into lower rates.”

By loan type, the FHA share of total apps remained unchanged at 12.1% from the week prior. The VA share of total applications fell to 11.6% from 12.0% the week prior. The USDA share of total applications decreased slightly to 0.5% from 0.6% the week prior.

And for the 12th consecutive month, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index for January 2023, the price and availability of building materials and raw materials again topped the list of problems builders faced over the past 12 months, but interest rates, however inflation and negative media moved considerably up the list.

Those polled by the NAHB found that builders cited some more widespread issues in 2022, with high interest rates a problem for just 2% of builders in 2021, but jumped to 66% of builders in 2022. The spike in inflation was another significant problem for 85% of builders in 2022, compared to just 63% who cited the same issue in 2021. Negative media reports making potential buyers cautious also impacted 55% of builders in 2022, compared to just 26% of builders in 2021.

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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