Mortgage Apps Continue to Ride the Refi Wave

According to the Mortgage Bankers Association (MBA), mortgage loan application volume declined 2.4% from the previous week, for the week ending August 27, 2021.

The MBA’s Market Composite Index, decreased 2.4% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3% compared with the previous week. The Refinance Index decreased 4% from the previous week, and was 2% higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1% from one week earlier. The unadjusted Purchase Index decreased 2% compared to the previous week, but 16% lower than the same week one year ago.

"There was little change in mortgage rates last week, with the 30-year fixed remaining at 3.03%. Despite low rates, refinance applications declined, with some borrowers still waiting for rates to drop even lower. Recent uncertainty around the economy and pandemic have kept rates low over the past month, which is why the refinance index has oscillated around these levels," said Joel Kan, MBA's Associate VP and Industry Forecasting.

The refinance share of mortgage activity decreased slightly to 66.8% of total applications from 67.3% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.2% of total applications.

Even as rates continue to hover in refi-friendly territory, a survey of approximately 1,000 borrowers conducted by Bankrate has shown that 74% of those with pre-pandemic mortgages haven't refinanced.

Among borrowers who haven’t refinanced, 32% of respondents said they wouldn’t save enough money to warrant a refi. Closing costs and fees was the second most-frequently cited objection, with 27% of respondents naming that as an obstacle.

By investor type, the FHA share of total applications rose a bit to 11.2% from 11% the week prior. The VA share of total applications decreased to 9.7% from 10% the week prior. The USDA share of total applications increased to 0.5% from 0.4% the week prior.

"Even with a slight increase, purchase activity hit its highest level since early July, as applications for conventional and government loans increased,” said Kan. “Home purchase activity continues to be dominated by higher price tiers of the market, with the purchase average loan size now at $396,500, the highest average in five weeks. According to FHFA, June's year-over-year increase in home prices was 18.8%, while the second quarter saw a 17.4 percent increase overall. Both measures set new records, as housing demand continued to outpace the inventory of homes for sale."

Redfin recently reported that national median home sale prices have increased 16% year-over-year for the four-week period ending August 22, as the share of home sellers dropping their asking prices each week continues to increase. Redfin found that asking prices of newly listed homes were up 10% from the same time a year ago to a median of $351,730, the lowest level since mid-April, and down 2.7% from the all-time high set during the four-week period ending June 27.

"As we approach the beginning of back-to-school season, home prices typically cool, supply winds down, and homes take longer to sell,” noted Redfin Chief Economist Daryl Fairweather. “All that's happening, just very slowly. I don't think the housing market will return to a fully typical state anytime soon, but we are starting to trend in that direction."