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Mortgage Application Volume Falls to 22-Year Low

As inflation continues to rear its ugly head, down the aisles of the grocery store, to the gas pumps, more and more Americans are being forced to channel their resources away from the housing market, and toward meeting their essential needs.

The Mortgage Bankers Association (MBA) reports, in its latest Weekly Mortgage Applications Survey for the week ending June 3, that mortgage application volume has dropped yet again, falling 6.5% week-over-week. Note that this data includes an adjustment for last week’s Memorial Day holiday.

The MBA’s Refinance Index decreased 6% from the previous week, and was 75% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 7% from one week earlier. The unadjusted Purchase Index decreased 18% compared with the previous week, and 21% lower year-over-year.

The refinance share of mortgage activity increased to 32.2% of total applications from 31.5% the previous week. The adjustable-rate mortgage (ARM) share of activity, which was showing signs of strength earlier in the quarter as rates slowly climbed, decreased to 8.2% of total applications.

“Weakness in both purchase and refinance applications pushed the market index down to its lowest level in 22 years,” said Joel Kan, MBA’s Associate VP of Economic and Industry Forecasting. “The 30-year fixed rate increased to 5.4% after three consecutive declines. While rates were still lower than they were four weeks ago, they remain high enough to still suppress refinance activity. Only government refinances saw a slight increase last week.”

As affordability pressures linger, a combination of high rates and record high home prices are sending buyers back to the sidelines, as the latest Fannie Mae Home Purchase Sentiment Index (HPSI) remained comparatively flat in May—decreasing by 0.3 points—but inching nearer its 10-year- and pandemic-low of 63.0 from April 2020.

“Consumers’ expectations that their personal financial situations will worsen over the next year reached an all-time high in the May survey, and they expressed greater concern about job security,” said Douglas G. Duncan, Fannie Mae Senior VP and Chief Economist. “Further, respondents’ pessimism regarding homebuying conditions carried forward into May, with the percentage of respondents reporting it’s a bad time to buy a home hitting a new survey high. The share reporting that it’s ‘easy to get a mortgage’ also decreased across almost all segments.”

In conjunction with consumer pessimism is dwindling builder confidence, as the National Association of Home Builders (NAHB) reported in its NAHB/Wells Fargo Housing Market Index (HMI), marking the fifth consecutive month that builder sentiment has declined and recording its lowest reading since June 2020.

“The housing market is facing growing challenges,” said NAHB Chief Economist Robert Dietz in late May. “Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12-year high and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family. Entry-level and first-time home buyers are especially bearing the brunt of this rapid rise in mortgage rates.”

By loan type, the MBA reported this week that the FHA share of total applications increased to 11.3%, up from 10.8% the week prior, while gains were also found in the VA share of total applications, which increased to 11.4% from 10.2% the week prior. And while FHA and VA loans were on the rise, the USDA share of total applications remained unchanged at 0.5%, equaling the week prior.

“The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past months,” added Kan. “These worsening affordability challenges have been particularly hard on prospective first-time buyers.”

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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