Mortgage Apps Rebound After Down Week

Mortgage application volume returned to the track to positive territory this week, as the Mortgage Bankers Association (MBA) reported a 5.3% week-over-week rise in overall app volume for the week ending April 7, 2023.

After four weeks of increasing app volume, apps dipped last week for the first time in a month, but steadily declining mortgage rates pushed apps back upward this week.

Also this week, the MBA’s Refinance Index increased a slight 0.1% from the previous week, and was 57% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 8% from one week earlier. The unadjusted Purchase Index increased 9% compared with the previous week, and was 31% lower than the same week one year ago.

“Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed rate decreasing to 6.30%–the lowest level in two months,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Prospective homebuyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week with purchase applications increasing by 8%. Refinance application volume was a mixed bag with total volume essentially flat, conventional volume down for the week, but VA refinance volume increasing. The level of refinance activity remains almost 60% below last year, as most homeowners are currently locked in at much lower rates.”

By loan type, the VA share of total applications increased to 12.8% from 11% the week prior. The USDA share of total applications decreased to 0.5% from 0.6% the week prior.

The refinance share of mortgage activity decreased to 27% of total applications from 28.6% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to just 6% of total applications.

“While the housing industry, a very interest-rate sensitive sector, has been negatively impacted by the Federal Reserve’s monetary tightening, the construction labor market has not experienced a sharp decline,” added First American Deputy Chief Economist Odeta Kushi of the latest U.S. jobs report. "The jobs openings rate in construction picked up to 4.9%, down from a series high of 5.8% in December 2022, but still strong. The ratio of construction hires per job opening fell in February and remains well below pre-pandemic levels, indicating it's more difficult to hire. In the March jobs report, residential building construction employment is up 2.3% year over year, while non-residential picked up by 4.2%. Residential building construction employment is up 11.6% compared with pre-pandemic levels, while non-residential building is up approximately 1%.”

And while mortgage apps are picking up, a dwindling supply of home may prove to be a stumbling block to homebuyers this spring. Redfin recently found that the pool of homes available to homebuyers is shrinking quickly because new listings are growing scarce. Redfin reports that new listings fell 21.8% from a year earlier nationwide during the four weeks ending April 2, one of the biggest drops since the start of the pandemic, contributing to an unseasonal early-spring decline in the total number of homes for sale.

“Today’s serious homebuyers have grown accustomed to the idea of a 5% or 6% rate and have adjusted their budgets accordingly," said Redfin Deputy Chief Economist Taylor Marr. "The lack of homes hitting the market explains why the market is moving fast even though sales are still down. The lack of new listings is also one reason why sales are down: Buyers can’t buy if sellers don’t want to sell.”

Redfin found that many homeowners are staying put because they’re unwilling to give up their low mortgage rate. Homebuyers are snatching up the homes that do hit the market extremely fast. Redfin reported that of the homes going under contract, nearly half are doing so within 14 days. That’s up from about one-quarter at the start of the year, an unusually quick winter increase. It would take 2.8 months for today’s supply of for-sale homes to sell at homebuyers’ current consumption rate, the shortest time since September. That’s a sharp drop from the three-year high of 4.5 months in late January and it marks the fastest winter decline in months of supply since at least 2015, in percentage terms.