Despite the 30-year fixed-rate mortgage (FRM) falling slightly last week, the Mortgage Bankers Association (MBA) reported that overall mortgage application volume decreased 2.0% week-over-week, according to data from its Weekly Mortgage Applications Survey for the week ending October 7, 2022.
The Refinance Index decreased 2% from the previous week, and was 86% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week, and was 39% lower than the same week one year ago.
“Mortgage rates moved higher once again during the first week of the fourth quarter of 2022, with the 30-year conforming rate reaching 6.81%, the highest level since 2006. Mortgage rates increased across all product types in MBA’s survey, with the largest, a 20-basis-point increase, for five-year ARM loans. The ARM share of applications remained quite high at 11.7%–just below last week’s level,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Application volumes for both refinancing and home purchases declined and continue to fall further behind last year’s record levels. The news that job growth and wage growth continued in September is positive for the housing market, as higher incomes support housing demand. However, it also pushed off the possibility of any near-term pivot from the Federal Reserve on its plans for additional rate hikes.”
The Bureau of Labor Statistics (BLS) reports that the American economy added 263,000 jobs in the month of September, as the unemployment rate edged back down to a more than 50-year low of 3.5%.
“In the household survey, the unemployment rate ticked back down to 3.5% as the size of the labor force fell slightly in September, with the participation rate falling one-tenth to 62.3%, erasing some of the prior month’s gains,” said Douglas G. Duncan, Chief Economist at Fannie Mae, on the latest BLS report. “This figure continues to be volatile and remains below the pre-pandemic peak, as many workers are still hesitant to return from the sidelines. Wages grew at a 5% year-over-year pace in September, another clear indicator that firms are looking to hire workers. Wage gains likely will further contribute to inflationary pressures in the economy. Finally, we note that residential construction employment (including specialty trade contractors) grew by 6,400 in September; we believe continued job growth in this sector likely will be needed to help builders fulfill their current orders.”
The MBA reported that the refinance share of mortgage activity remained unchanged at 29% of total applications, while the adjustable-rate mortgage (ARM) share of activity fell to 11.7% of total applications, down slightly from last week’s reading of 11.8%.
Redfin reported that homebuying demand has pulled back as mortgage rates continue to rise, as Redfin’s Homebuyer Demand Index, a measure of requests for home tours and other home-buying services, fell 6% last week to its lowest level since mid-June, when mortgage rates first jumped toward 6%.
Another factor impacting the housing market last week is the continued rebuild of southern areas of the nation in the aftermath of Hurricane Ian. CoreLogic’s latest estimates of the damage and loss totals from Ian found that total flood and wind losses will total between $41 billion and $70 billion, as estimate that includes wind loss, re-evaluated insured and uninsured storm surge loss and newly calculated inland flood loss for residential and commercial properties. Hurricane Ian will go down as the costliest Florida storm to date since Hurricane Andrew made landfall in 1992.
By loan type, the MBA also reported the FHA share of total applications increased to 13.5% this week, up from 13.2% the week prior. The VA share of total applications also increased slightly to 10.9% this week, from 10.7% the week prior. The USDA share of total applications fell slightly to 0.5%, down from 0.6% the week prior.