Mortgage Apps Fall for Sixth Consecutive Week

On the eve of the Federal Reserve’s latest actions to curb the nation’s inflationary issues, the Mortgage Bankers Association (MBA) reported that overall mortgage application volume decreased for the sixth straight week, falling 0.5% week-over-week (for the week ending October 28, 2022).

The MBA’s Refinance Index increased 0.2% over the previous week, and was 85% lower than the same week just one year ago. The seasonally adjusted Purchase Index fell 1% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week, and was 41% lower than the same week one year ago.

“Mortgage applications declined for the sixth consecutive week despite a slight drop in rates. The 30-year fixed rate decreased for the first time in over two months to 7.06%, but remained close to its highest since 2002,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Apart from the ARM loan rate, rates for all other loan types were more than three percentage points higher than they were a year ago. These elevated rates continue to put pressure on both purchase and refinance activity and have added to the ongoing affordability challenges impacting the broader housing market, as seen in the deteriorating trends in housing starts and home sales.”

By loan type, the FHA share of total applications decreased to 13.5% from 13.9% the week prior, while the VA share of total applications decreased slightly to 10.3% from 10.7% the week prior. The USDA share of total applications remained unchanged at 0.5% from the week prior.

And while mortgage rates may had dipped slightly, affordability issues linger for prospective buyers, with the rise in unemployment slowly becoming yet another factor hampering homeownership.

In the week ending October 22, the advance figure for seasonally adjusted initial claims was 217,000, an increase of 3,000 over the previous week's unrevised level of 214,000, according to the U.S. Department of Labor (DOL). The advance seasonally adjusted insured unemployment rate was 1% for the week ending October 15, unchanged from the previous week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending October 15 was 1,438,000, an increase of 55,000 from the previous week's revised level. The previous week's level was revised down by 2,000 from 1,385,000 to 1,383,000.

One positive byproduct has been a replenishment of the nation’s housing supply. Zillow reports that homes are lingering on the market much longer, motivating sellers to build an attractive and competitively priced listing to attract a buyer in today's market. The difference in days to pending—the median number of days homes that sell have been listed before an offer is accepted—and the age of inventory—the median number of days homes currently listed for sale have been on the market—can reveal valuable information for home sellers, especially during a time of transition.

Zillow found that the median number of days a for-sale home has been on the market is up 45% from last year nationally, and is up in 48 of the 50 largest markets. Some 46% of listings have been on the market for more than 60 days, up 10 percentage points from last year.

"Last year, sellers could seemingly list their home at any price and see multiple offers roll in above list price within days," said Zillow Senior Economist Nicole Bachaud. "Now, buyers have some negotiating power, and sellers are under pressure. Buyers are still out there and willing to buy when they find the right home at the right price, which will provide a floor for the price declines we are currently seeing. But sellers need to do things right to attract the attention of these buyers—pricing their home competitively and making their listing attractive to online home shoppers. Especially in a market that's quickly changing like today's, working with an experienced agent who knows the local market is valuable."

And even though rates fell slightly week-over-week, the 30-year fixed rate still remains over the 7% mark, thus forcing many to take a “wait and see” approach to the current state of the housing market.

The MBA reports the refinance share of mortgage activity increased slightly to 28.6% of total applications from 28.2% the previous week, while record high rates have forced the adjustable-rate mortgage (ARM) share of activity to fall to 11.8% of total applications.

“With most homeowners locked into significantly lower rates, refinance applications continued to run more than 80% below last year’s pace, while the refinance share of applications was 28.6%–the fifth straight week below 30%,” added Kan.