Purchase Apps Fall for First Time in a Month

The Mortgage Bankers Association (MBA) reports that overall mortgage application volume decreased 4.4% from one week earlier for the week ending June 30, 2023.

And as rates begin to slowly creep upward inching closer to the 7%-mark, the MBA’s Refinance Index decreased 4% from the previous week, and was 30% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 5% from one week earlier, while the unadjusted Purchase Index increased 6% compared with the previous week, and was 22% lower than the same week one year ago.

“Mortgage applications fell to their lowest level in a month last week as rates for most loan types increased. As mortgage-Treasury spreads remained wide, the 30-year fixed rate increased to 6.85%, the highest rate since the end of May,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Purchase applications decreased for the first time in a month, as homebuyers remained sensitive to rate changes. Rates are still over a percentage point higher than a year ago, and housing affordability is still a challenge in many parts of the country. However, the average loan size for a purchase application declined to $423,500–its lowest level since January 2023. This was likely driven by reduced purchase activity in some high-price markets, and more activity in some of the lower price tiers as buyers searched for more affordable options.”

The MBA also reported that the refinance share of mortgage activity increased slightly to 27.4% of total applications from 27.2% the previous week, while popularity in adjustable-rate mortgages (ARMs) is seeing new life as the share of activity increased to 6.2% of total applications.

By loan type, the FHA share of total applications increased to 13% from 12.9% the week prior. The VA share of total applications decreased to 11.7% from 12.2% the week prior. The USDA share of total applications remained unchanged at 0.4% from the week prior.

“The 30 year-fixed mortgage rates were over 6.6% for every week in June, creating a challenging summer market for both home sellers and buyers,” added Realtor.com Economist Jiayi Xu. “For sellers, these high mortgage rates have been compelling existing homeowners to delay their selling and moving plans, despite the fact that home prices are still high and consumers generally agree that it’s a good time to sell. In fact, recent data indicated that nearly 82% of home shoppers reported feeling locked-in by their existing low-rate mortgage, while around one in seven homeowners without a selling plan cited their current low rate as their reason for remaining on the sidelines. As a result, the number of homes for sale remained lower than last year’s levels, with year-to-date new listings lagging 20% behind last year’s pace. In addition to the limited inventory for buyers, the rising interest rates also pose a significant concern for those intending to purchase a home within the next year. About 78% of home shoppers planning to buy in the near future anticipate being priced out of the market if both home prices and mortgage rates continue to rise.”

According to ATTOM in its Q2 2023 U.S. Home Affordability Report, median-priced single-family homes and condos were less affordable in Q2 of 2023 compared to historical averages in 98% of counties around the nation, continuing a pattern dating back to early 2022. The report shows that affordability has worsened across the nation in Q2, amid a renewed jump in home prices that has pushed the typical portion of average wages nationwide required for major homeownership expenses up to 33%. ATTOM further states that this latest portion is considered unaffordable by common lending standards, which call for a 28% debt-to-income ratio. It also marks the highest level since 2007 and remains well above the 25% figure from early in 2022, when a spike in home-mortgage rates had just begun to raise ownership costs.

"The U.S. housing market has done an about-face following a downturn that threatened to usher in an extended period of flat or falling prices. With that has come another blow to how much house the average worker around the country can afford," noted Rob Barber, CEO for ATTOM. "Whether this is just a temporary blip amid this year's peak buying season or a sign of another extended price surge is anyone's guess. But any predictions of a market demise were certainly premature–and house hunters are feeling the pinch."