With rates still in excess of the 5% mark, mortgage application volume has trended downward yet another week, as the Mortgage Bankers Association (MBA) reports application volume falling 2.3% [1] week-over-week (for the week ending May 27, 2022).
The MBA’s Refinance Index decreased 5% from the previous week, yet was 75% lower than the same week just one year ago. The seasonally adjusted Purchase Index decreased 1% from one week earlier. The unadjusted Purchase Index decreased 2% compared to the previous week, and was 14% lower than the same week one year ago.
“Mortgage rates fell for the fourth time in five weeks, as concerns of weaker economic growth and the recent stock market sell-off drove Treasury yields lower,” said MBA’s Associate VP of Economic and Industry Forecasting Joel Kan [2]. “Purchase applications last week were 14% lower than last year, with more activity in the larger loan sizes. Demand is high at the upper end of the market, and supply and affordability challenges are not as detrimental to these borrowers as they are to first-time buyers.”
Last week, Freddie Mac reported the 30-year fixed-rate mortgage (FRM) falling to 5.10% [3], down from 5:25% the previous week.
With rates still above the 5%-mark, more and more are shying away from the refi market, as the MBA reported the refinance share of mortgage activity decreasing to 31.5% of total applications this week, down from 32.3% the previous week. And a product that recently caught fire, but has fizzled out, the adjustable-rate mortgage (ARM), found its share of activity decreasing to 8.75% of total applications.
“Mortgage applications decreased to the lowest level since December 2018, as the purchase market continues to struggle with supply and affordability challenges,” said Kan.
As those supply and affordability issues linger, the Biden Administration recently unveiled the Housing Supply Action Plan [4], an initiative drafted to help close America’s housing supply shortfall over the next five years, beginning with the creation and preservation of hundreds of thousands of affordable housing units within the next three years.
"We commend the White House for joining the fight to put the issue of housing affordability in the forefront of the national economic agenda after NAHB [National Association of Home Builders] had been urging the administration to move on this vital national concern for the past several months," said NAHB Chairman Jerry Konter [5]. "However, the plan does not go far enough to resolve the many underlying challenges facing the home building industry, including skyrocketing costs for lumber and other building materials, and the broader supply chain crisis. These issues must be addressed to help home builders increase the production of much-needed housing.”
The NAHB reported a recent decline in builder confidence [6], as double-digit price increases for materials and home price appreciation are taking a toll on the nation’s overall housing demand. The most recent Producer Price Index (PPI) report from the Bureau of Labor Statistics (BLS) [7] found that building material prices were up 19.2% year-over year, and have risen 35.6% since the start of the pandemic.
With continued spikes in the cost of fuel and overall inflationary concerns, many Americans are finding the economic landscape too volatile to purchase the home of their dreams.
By loan type, the MBA reported the FHA share of total applications decreased to 10.8% from 11.3% the week prior, while the VA share of total applications decreased slightly to 10.2% from 10.4% the week prior. The USDA share of total applications meanwhile remained unchanged at 0.5% from the week prior.