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Refi Volume Falls to Three-Year Low

Led by rapidly rising mortgage rates, the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA) finds overall mortgage application volume continuing to slide south, down 6.3% week-over-week.

The MBA’s Refinance Index fell further as well, decreasing 10% from the previous week, and was 62% lower than the same week just one year ago.

The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index decreased 3% compared with the previous week, and was 9% lower than the same week one year ago.

“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” said Joel Kan, MBA’s Associate VP of Economic and Industry Forecasting. “The 30-year fixed mortgage rate increased for the fourth consecutive week to 4.90% and is now more than 1.5 percentage points higher than a year ago. As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019.”

The refinance share of mortgage activity decreased to 38.8% of total applications, down from 40.6% the previous week, while the adjustable-rate mortgage (ARM) share of activity increased to 6.8% of total applications.

Despite hikes in mortgage rates and home prices, Americans are still gung-ho about housing, as a recent study commissioned by Bankrate and conducted by YouGov Plc of 2,530 people over the course of three days from March 2-4 found that respondents very much value the stability of owning a single-family home, and view it as a key indicator of economic stability. According to the survey, 74% of respondents ranked owning a home first as the highest hallmark of economic prosperity, followed by the ability to retire (66%); a successful career (60%); owning a car (50%); having children (40%); and getting a college degree (35%).

Positive jobs numbers in March will assist many in landing that home of their dreams despite continued supply issues.

“Total non-farm payroll employment increased by 431,000 in March, slightly below consensus expectations,” said First American Deputy Chief Economist Odeta Kushi. “Approximately 93% of the jobs lost in the pandemic have been regained. If monthly gains continue at the March pace, we could return to the pre-COVID employment peak by July 2022.”

The adage of you can’t buy what is not for sale still holds true, as strong employment numbers and an eager market still cannot overcome the fact that the nation’s housing supply continues to suffer.

Realtor.com’s review of March 2022 data has found that the number of active listings nationwide fell to 381,950, a total that is down 18.9% year-over-year. This means that for every five homes that were for sale before the pandemic, there are only two homes today. In addition, new listings were down 3.4% in March, and the median number of days a home stood on the market is 38, down 11 days from just one year ago.

By loan type, the MBA reported that the FHA share of total applications decreased slightly to 9.2%, from 9.3% the week prior, while the VA share of total applications increased to 9.8%, up from 9.5% just one week ago. The USDA share of total applications remained unchanged at 0.5% from the week prior.

“The hot job market and rapid wage growth continue to support housing demand, despite the surge in rates and swift home-price appreciation,” added Kan. “However, insufficient for-sale inventory is restraining purchase activity. Additionally, the elevated average purchase loan size, and steeper 8% drop in FHA purchase applications, are both indicative of first-time buyers being disproportionately impacted by supply and affordability challenges.”

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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