Peak home ownership? Mortgage Applications Generate Weekly Earnings
Demand from home buyers has had mortgage lenders incredibly busy over the summer, but it may have peaked.
Mortgage applications to buy a home, which had fallen for four straight weeks, were essentially flat last week, rising only 0.2%, according to the Mortgage Bankers Association’s seasonally adjusted index.
Refinances helped push total mortgage application volume up 1.7% last week from the previous week.
A slight drop in mortgage interest rates did the trick. Average contract rate for 30-year fixed rate mortgages with compliant loan balances ($ 510,400 or less) decreased from 3.02% to 3%, with points falling from 0.35 to 0.35 (set-up costs included) for loans with a down payment of 20%. This rate was more than a percentage point higher a year ago.
Home loan refinancing requests, which are the most sensitive to weekly rate changes, increased 3% on the week and 80% from a year ago. The refinancing share of mortgage activity rose to 66.7% of total applications, from 66.1% the previous week.
While homebuyer mortgage demand was flat last week compared to the previous week, it was still 24% higher than a year earlier.
Homebuyers are grappling with not only a record supply of homes for sale, but also rapidly rising home prices. This was evident in the average size of purchase loan applications last week, which set a new record – $ 372,600.
“These results highlight just how strong the upper end of the market is right now, with outsized growth rates in the highest loan categories,” said Joel Kan, associate vice president of economic and industrial forecasting at MBA. “In addition, housing inventory shortages have pushed domestic home prices considerably higher on a year-over-year basis.”
Realtors continue to report strong buyer demand in markets across the country, but with so little entry level supply, sales are likely to suffer in the coming months.
Mortgage rates continue to be stubborn, hitting near record lows, even on days when bond yields, which they loosely track, rise. This gives buyers more purchasing power, but as house prices rise faster, that power weakens.