Applications Drop Another 6.5%

Mortgage loan application volume dropped by 6.5%, the fifth decrease in six weeks, the Mortgage Bankers Association’s (MBA) weekly survey shows.

The adjusted Market Composite Index, a measure of mortgage loan application volume, fell by 6.5%. The adjusted purchase index fell 7%, while the unadjusted purchase index fell by 18% and was 21% lower YOY.

The refinance index fell 6% and was down 75% YOY, though refinances made up a higher share of total applications (32.2%, up from 31.5%) as purchase applications dwindle.

ARM activity fell to 8.2% of total applications. 

“Weakness in both purchase and refinance applications pushed the market index down to its lowest level in 22 years. The 30-year fixed-rate increased to 5.4% after three consecutive declines. While rates were still lower than they were four weeks ago, they remain high enough to still suppress refinance activity. Only government refinances saw a slight increase last week,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

“The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past months. These worsening affordability challenges have been particularly hard on prospective first-time buyers.”

Inventory increased for the first time in May since June 2019, with active listings up 8% YOY. However, active listings were still down 48.5% YOY, meaning inventory is still half of what it once was. 

Inventory is an important factor in how the housing market will move change now that it’s showing signs of cooling.

“My view has been that the market shift will show up first in inventory, [because] as inventory increases, house-price growth will slow,” Bill McBride, a real-estate and economics writer, told The Atlantic.

McBride predicted the housing bubble in 2006 by watching inventory levels.

The FHA share of total applications rose from 10.8% to 11.3%. The VA share of total applications rose to 11.4% from 10.2%, while the USDA share remained unchanged at 0.5%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.40% from 5.33%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances also fell to 4.99% from 4.93%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA rose from 5.20% to 5.30%, and for 5/1 ARMs increased from 4.46% to 4.51%.