Mortgage Apps Dip to Levels Last Recorded in 1995

After a slight uptick last week, the Mortgage Bankers Association (MBA) reports that overall mortgage application volume decreased 6.9% from one week earlier, according to the MBA’s Weekly Mortgage Applications Survey for the week ending October 13, 2023.

The MBA’s Refinance Index decreased 10% from the previous week, and was 12% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 6% from one week earlier, while the unadjusted Purchase Index decreased 5% compared to the previous week, and was 21% lower than the same week one year ago.

“Applications decreased to their lowest level since 1995, as the 30-year fixed mortgage rate increased for the sixth consecutive week to 7.70%–the highest level since November 2000,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Both purchase and refinance applications declined, driven by larger drops for conventional applications. Purchase applications were 21% lower than the same week last year, as homebuying activity continues to pull back given reduced purchasing power from higher rates and the ongoing lack of available inventory. The ARM share was 9.3%, the highest share in 11 months, as some borrowers look for alternative ways to lower their monthly payments. Refinance activity was at its lowest level since early 2023. There is very limited refinance incentive with mortgage rates at multi-decade highs.”

The refinance share of mortgage activity decreased to 30.5% of total applications from 31.6% the previous week. And as Kan mentioned, the adjustable-rate mortgage (ARM) share of activity increased slightly to 9.3% of total applications, up just one basis point over last week’s reading of 9.2%.

By loan type, the MBA reported that the FHA share of total applications increased to 14.8%, up from 14.4% the week prior. The VA share of total applications increased five basis points to 10.7%, up from 10.2% the week prior, while the USDA share of total applications remained unchanged at 0.5% from the week prior.

With prospective buyers continuing to struggle with affordability issues, Redfin reported that new listings of U.S. homes for sale ticked up 2% since the start of September, due in part to more homeowners putting their homes on the market, despite being locked into relatively low mortgage rates. The total number of homes for sale is down 14% from a year earlier during the four weeks ending October 8—the smallest decline since July.

“Despite last week’s hotter-than-expected jobs report, rates have fallen after the Fed signaled this week that it is unlikely to hike interest rates again and war broke out in Israel,” said Redfin Economic Research Lead Chen Zhao. “Buyers should also remember that the average mortgage rate in the news is just that: an average. Many buyers can secure a lower rate by shopping around; the difference between rates among lenders is bigger when rates are higher. Buying down a mortgage rate is always an option, too.”

Redfin further found that the median sale price on a typical U.S. home was $370,000, representing a 2.7% year-over-year (YoY) increase. Prices are up partly because elevated mortgage rates were hampering prices during this time last year. The median asking price nationwide was $388,223, a 5.2% YoY increase, marking the biggest increase in a year. In terms of effects on homebuyer pocketbooks, the median monthly mortgage payment was $2,736 at a 7.49% mortgage rate, up 10% YoY.