After Four Weeks of Increases, Mortgage Apps Tick Downward

Despite a continued drop in mortgage rates, the Mortgage Bankers Association (MBA) reported that mortgage application volume decreased 4.1% from one week earlier, according to its latest Weekly Mortgage Applications Survey for the week ending March 31, 2023.

The MBA’s Refinance Index decreased 5% from the previous week, and was 59% lower than the same week one year ago. The MBA’s seasonally adjusted Purchase Index decreased 4% from one week earlier, while the unadjusted Purchase Index decreased 3% compared to the previous week, but was 35% lower than the same week one year ago.

“Spring has arrived, but the housing market is missing the customary burst in listings and purchase activity that typically mark the season. After four weeks of increasing purchase application activity, volume declined a bit this week even with another small drop in mortgage rates,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Additionally, refinance application volume continues to be quite low. Although the mortgage rate for conforming balance loans declined by five basis points over the week to 6.40%, the mortgage rate for jumbo loans increased by nine basis points to 6.36%. While we have seen relative weakness at the high end of the housing market in recent months, the divergence in rates suggests that banks may be tightening credit in response to recent challenges, preserving balance sheet capacity as deposit balances have declined. In recent years, most jumbo loans have been kept on depository balance sheets.”

The refinance share of mortgage activity decreased to 28.6% of total applications from 29.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 7.2% of total applications.

By loan type, the FHA share of total applications decreased to 12% from 12.3% the week prior. The VA share of total applications decreased to 11% from 11.6% the week prior. The USDA share of total applications increased to 0.6% from 0.5% the week prior.

“At the entry-level segment of the market, purchase applications for both FHA and VA loans decreased last week,” said Fratantoni. “We do expect strong demand from first-time homebuyers over the next several years given the large number of millennials hitting peak first-time homebuyer age, but affordability remains a real challenge in this environment.”

A recent report from ATTOM has found that median-priced single-family homes and condos were less affordable in Q1 of 2023 compared to historical averages in 94% of counties across the nation with enough data to analyze–a metric far above the 62% of counties that were historically less affordable in Q1 of 2022.

ATTOM’s Q1 2023 U.S. Home Affordability Report also shows that homebuying conditions for house hunters may be improving as the portion of average wages nationwide required for typical major homeownership expenses has fallen slightly to 30% in Q1 of 2023.

The recently published 2023 Home Buyers and Sellers Generational Trends report from the National Association of Realtors (NAR), which examines the similarities and differences of recent homebuyers and sellers across generations, found that the combined share of younger boomer (58- to 67-years-old) and older boomer homebuyers (68- to 76-years-old) rose to 39% in 2022, up from 29% the year prior. Younger millennials (24- to 32-years-old) and older millennials (33- to 42-years-old) have been the top group of homebuyers since 2014, but they saw their combined share fall from 43% in 2021 to 28% last year.

"Baby boomers have the upper hand in the homebuying market," said Dr. Jessica Lautz, NAR Deputy Chief Economist and VP of Research. "The majority of them are repeat buyers who have housing equity to propel them into their dream home, be it a place to enjoy retirement or a home near friends and family. They are living healthier and longer and making housing trades later in life."