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Mortgage Apps Drop 30% YoY

According to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA), overall mortgage applications decreased 1.4% from one week earlier.

This marked the fourth consecutive week that overall app volume fell week-over-week.

The Refinance Index decreased 1% from the previous week, and was 42% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index decreased 13% compared to the previous week, and was 27% lower than the same week one year ago.

“Mortgage rates declined last week from a recent high, but total application activity slipped for the fourth straight week. The 30-year fixed rate dipped to 6.81%, 10 basis points lower than last week, but still the second highest rate of 2023,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Overall applications were more than 30% lower than a year ago, as borrowers continue to grapple with the higher rate environment. Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers. There was less of a decline in government purchase applications last week, which was consistent with a growing share of first-time home buyers in the market.”

By loan type, the FHA share of total applications increased to 13.2% from 12.7% the week prior, as did the VA share of total applications, which rose to 12.5% from 12.1% the week prior. The USDA share of total applications fell slightly to 0.4% from 0.5% the week prior.

The refinance share of mortgage activity increased to 27.3% of total applications from 26.7% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.8% of total applications.

The lack of inventory is forcing home prices upward, as the latest Home Price Index (HPI) and HPI Forecast for April 2023 from CoreLogic has found that single-family home price growth rose nationwide by 2% year-over-year in April, marking the 135th consecutive month of annual growth, and sixth straight month of single-digit gains.

“While mortgage rate volatility continues to cause buyer hesitation, the lack of for-sale homes is putting firm pressure on prices this spring, leading to above-average seasonal monthly gains and a rebound in home prices in most markets,” said CoreLogic Chief Economist Selma Hepp. ”Nevertheless, the recent surge in mortgage rates and continued inflation issues suggest that rates may remain elevated, leading home price appreciation to possibly relax this summer, and return to average seasonal gains later in 2023.”

Affordability continues to be a hurdle to homeownership for many as well, as Black Knight reports it now takes 34.2% of the median household income to make principal and interest (P&I) payments on the median-priced home purchased with 20% down using a 30-year fixed-rate mortgage (FRM).

“In a sense, the gridlocked housing market has been feeding on itself,” said Black Knight VP of Enterprise Research Andy Walden. “While elevated interest rates continue to weigh on both affordability and demand, they’re simultaneously constricting supply as well as would-be sellers who locked in ultra-low rates early in the pandemic continue to sit on the sidelines. The combination of lower supply and demand in April led to both slowing sales and firming prices. As home sales dipped, April marked the fourth consecutive month of home price gains, which are now almost universally rising across the country again on a seasonally adjusted basis. Only Austin, Texas—the sole market where inventory is back above pre-pandemic levels—is still seeing meaningful price corrections continuing into the spring. In today’s market, interest rates are acting as a double-edged sword, reducing, or increasing both demand and supply as they rise and fall, making it challenging to find a rate-driven path to easing affordability and home prices.”

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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