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Rise in Rates Push Decline in Mortgage Apps

Mortgage applications decreased 6.3% from one week earlier, according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending October 15, 2021.

The Market Composite Index, a measure of mortgage loan application volume, decreased 6.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6% compared with the previous week.

The Refinance Index decreased 7% from the previous week, and was 22% lower than the same week one year ago.

The seasonally adjusted Purchase Index decreased 5% from one week earlier. The unadjusted Purchase Index decreased 5% compared with the previous week, and was 12% lower than the same week one year ago.

The refi share of mortgage activity decreased slightly to 63.3% of total applications, from 63.9% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 3.3% of total applications.

"Refinance applications declined for the fourth week, as rates increased, bringing the refinance index to its lowest level since July 2021. The 30-year fixed rate has increased 20 basis points over the past month and reached 3.23% last week—the highest since April 2021. The 15-year fixed rate increased to 2.54%, which is the highest since July," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "Purchase activity declined and was 12% lower than a year ago, within the annual comparison range that it has been over the past six weeks. Insufficient housing supply and elevated home-price growth continue to limit options for would-be buyers."

A new analysis of home sale data by Redfin found that the median home sale price rose 14% year-over-year to $376,800 in September 2021, the 14th consecutive month of double-digit price gains.

"The severe lack of inventory is restricting home sales," said Redfin Chief Economist Daryl Fairweather. "Even though plenty of people bought homes last year, many homebuyers waited while the pandemic went from bad to worse and remote-work policies were finalized. The homebuyers who are just beginning their search are finding that the well has run dry. But I am hopeful that as it becomes easier to get building materials, we will finally have a strong year for new construction in 2022. That's what the market needs more than anything."

Contributing to the lack of supply is the bottleneck in building supplies, which are being marked up to record highs. The price of framing lumber hit a record-high of more than $1,500 per thousand board feet in mid-May, according to Random Lengths. The previous record before prices spiked in April 2020 was just below $600 per thousand board feet.

Redfin reported that Austin, Texas experienced the highest increase in the number of homes for sale in September 2021, up 3.3% year-over-year, followed by Tacoma, Washington (2.6%); and Columbus, Ohio (0.3%). The Baton Rouge, Louisiana metro had the largest drop off in overall active listings, falling 52.6% since last September. Salt Lake City, Utah (-50.3%); Rochester, New York (-46.9%); and North Port, Florida (-42.6%) also saw far fewer homes available on the market than a year ago.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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