Applications Down For Another Week

Mortgage applications fell for another week as rates remained above 7% and high home prices kept buyers on the bench.

The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – decreased by 5.6%, piling onto the week prior’s 10.6% dip.

Adjusted purchase applications slipped by 5%, while the unadjusted index was down by 1% and was 12% lower YOY.

Rates shot moved down slightly but not by much, coming in at 7.04%. MBA’s SVP and Chief Economist Mike Fratantoni noted that this is about a quarter percentage point above the beginning of the year.

“Higher rates in recent weeks have stalled activity, and last week it dropped more for those seeking FHA and VA refinances. Purchase activity is running 12% behind last year’s pace, but our January Builder Application Survey results showed that applications to buy new homes were up 19% compared to last year,” he said.

“This disparity continues to highlight how the lack of existing inventory is the primary constraint to increases in purchase volume. However, mortgage rates above 7% sure don’t help.”

Home prices continue to reach record highs as inventory issues create competition for the few houses available, keeping the dream of homeownership out of reach for many Americans.

New listings have increased somewhat, but supply is still too low to account for demand. Single-family housing construction started the year rocky, partly due to severe weather, but analysts expect homebuilders to continue pushing forward with new stock.

“We are forecasting single-family starts to post a modest gain in 2024 as mortgage rates moderate on expected interest rate cuts by the Federal Reserve later this year,” NAHB Chief Economist Robert Dietz said of the trend.

New homes take time, however, and it’s unclear when the Fed may cut rates. Fed Chairman Jerome Powell suggested last month that while the Central Bank’s policies have impacted the housing market, stock shortages are outside its purview.

“We have longer-run problems with the availability of housing,” Powell said at a press conference. “There hasn’t been enough housing built… [but] these are not things that we have any tools to address.”

Refinances were down by 7% and accounted for 31.2% of applications. They had seen some movement while rates retreated in the first weeks of the year, but remained historically low. In the past decade, they averaged 58% of all activity.

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