Mortgage App Volume Falls for Third Consecutive Week

Amid continued economic instability, the Mortgage Bankers Association (MBA) reports that overall mortgage application volume fell 3.7% week-over-week for the week ending May 26, 2023.

The Refinance Index decreased 7% from the previous week, and was 45% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week, and was 31% lower than the same week one year ago.

“Inflation is still running too high, and recent economic data is beginning to convince investors that the Federal Reserve will not be cutting rates anytime soon. Mortgage rates for conforming, balance 30-year loans were being quoted above 7% by some lenders last week, and the weekly average at 6.9% reached the highest level since last November,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Application volumes for both purchase and refinance loans decreased last week due to these higher rates. While refinance demand is almost entirely driven by the level of rates, purchase volume continues to be constrained by the lack of homes on the market.”

The refinance share of mortgage activity decreased to 26.7% of total applications, down from 27.4% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.8% of total applications.

By loan type, the FHA share of total applications increased to 12.7% from 12.5% the week prior. The VA share of total applications decreased to 12.1%, down from 12.5% the week prior. The USDA share of total applications remained unchanged at 0.5% from the week prior.

While rates and inventory are primary drivers of an application downturn, the MBA’s Purchase Applications Payment Index (PAPI)—a measurement of how new monthly mortgage payments vary across time relative to income—found that homebuyer affordability took another hit in April, with the national median payment applied for by purchase applications increasing 0.9% to $2,112 from the reported $2,093 in March.

“Homebuyer affordability eroded further in April, with both the typical borrower monthly payment and median purchase amount rising due to higher rates and home prices,” said Edward Seiler, MBA's Associate VP, Housing Economics, and Executive Director, Research Institute for Housing America. “Elevated interest rates and low housing supply have kept many prospective borrowers on the sidelines. However, MBA expects mortgage rates to stabilize and inventory levels to improve, which should incentivize some buyers to re-enter the market.”

However, savvy first-time buyers are negotiating lower prices with sellers, as the latest RE/MAX National Housing Report found the median sales price rose 2.3% to $409,000 in April month-over-month.

As RE/MAX President and CEO Nick Bailey explains, "Sales may be down across the U.S. as move-up buyers, who like their current mortgage rate, choose to stay in their homes. But first-time homebuyers are active and those entering the market have an edge as sellers are negotiating more and giving buyers a chance."