Overall Mortgage App Volume Falls to 27-Year Low

Even though the 30-year fixed-rate mortgage (FRM) fell last week after hitting highs last seen two decades ago, mortgage rates were still above the 7% mark and remain a major hurdle for buyers, as the Mortgage Bankers Association (MBA) reported a 2.9% week-over-week decline in overall app volume for the week ending September 1, 2023.

The MBA’s Refinance Index decreased 5% from the previous week, and was 30% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index decreased 5% compared to the previous week, and was 28% lower than the same week one year ago.

“Mortgage applications declined to the lowest level since December 1996, despite a drop in mortgage rates. Both purchase and refinance applications fell, with the Purchase Index hitting a 28-year low, as prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “The 30-year fixed mortgage rate decreased to 7.21% last week, but rates remained more than a full percentage point higher than a year ago, despite mixed data on the health of the economy, and signs of a cooling job market. The Refinance Index dropped to its lowest level since January 2023, driven by a 6% decline in conventional refinances.”

The MBA also reported the refinance share of mortgage activity decreased slightly to 30% of total applications from 30.1% the week prior, while the adjustable-rate mortgage (ARM) share of activity decreased to 6.7% of total applications.

By loan type, the FHA share of total applications rose to 13.7% from 13.2% the week prior, as the VA share of total applications fell to 11.3% from 11.6% the week prior. The USDA share of total applications increased slightly to 0.6%, up from 0.4% the week prior.

While those looking to jump into the housing market contend with the combined forces of low inventory and rates in excess of 7%, a rise in home prices has been added to affordability hurdle, as Redfin reports the median home-sale price rose 5% year-over-year to $380,000, representing the biggest uptick in 10 months. In addition, the typical monthly mortgage payment hit an all-time high of $2,649.

Median home-sale prices in Miami rose 17% year-over-year during the four weeks ending August 27, marking the biggest increase the metro area has seen since October 2022. Miami’s rise also marks the greatest increase among the 50 most populous U.S. metros, though almost all of those metros posted year-over-year price gains in August. Prices declined in just U.S. six metros, including Austin, Texas; Phoenix; Portland, Oregon; Fort Worth, Texas; Las Vegas; and San Antonio, Texas.