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Slight Drop in Rates Spurs Rise in Mortgage App Activity

The Mortgage Bankers Association (MBA) has reported that overall mortgage application volume rose 2.7% week-over-week for the week ending November 11, 2022, on the heels of last week’s slight 0.1% decline.

The MBA’s Refinance Index decreased 2% from the previous week, and was 88% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 4% from one week earlier, while the unadjusted Purchase Index decreased 10% compared with the previous week, and was 46% lower than the same week one year ago.

The refinance share of mortgage activity continues to slide, decreasing to 27.6% of overall application volume, down from 28.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased as well, falling to just 10.6% of total applications.

“Mortgage rates decreased last week as signs of slower inflation pushed Treasury yields lower. The 30-year fixed rate saw the largest single-week decline since July 2022, dropping to 6.9%,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Application activity, adjusted to account for the Veteran’s Day holiday, increased in response to the drop in rates–driven by a 4% rise in home purchase applications. Purchase applications increased for all loan types, and the average purchase loan dipped to its smallest amount since January 2021. Refinance activity remained depressed, down 88% over the year. There is very little refinance incentive with rates so much higher than last year.”

As refi activity dips even further, hitting levels last seen 22 years ago, affordability in the nation’s current economic environment remains a major obstacle to homeownership for many.

An analysis of third quarter market data by the National Association of Realtors (NAR) found an overwhelming majority of metro markets saw home price gains in Q3 of 2022. Some 46% of the 185 tracked metro areas recorded double-digit price increases–down from 80% in Q2 of this year. NAR reported the national median single-family existing-home price climbed 8.6% from a year ago to $398,500, as year-over-year price appreciation decelerated when compared to the previous quarter's 14.2%.

"Much lower buying capacity has slowed home price growth and the trend will continue until mortgage rates stop rising," said NAR Chief Economist Lawrence Yun. "The median income needed to buy a typical home has risen to $88,300–that's almost $40,000 more than it was prior to the start of the pandemic, back in 2019."

By loan type, the MBA reported the FHA share of total applications for the week increased slightly to 13.5%, up from 13.3% the week prior, while the VA share of total applications increased to 10.6% from 10.3% the week prior. The USDA share of total applications increased slightly as well to 0.6%, up from 0.5% the week prior.

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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