Mortgage applications dipped again after a brief increase last week, despite rates cooling.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – decreased by 2.9%, drifting down after the week prior’s 2.3% increase.
Applications are now at their lowest level since December 1996. Adjusted purchase applications fell by 2%, while the unadjusted index dipped 5% from the week before and was 28% lower YOY.
The average interest rate for a 30-year fixed loan fell 10 bps to 7.21%.
“Both purchase and refinance applications fell, with the purchase index hitting a 28-year low, as prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
“The 30-year fixed mortgage rate decreased to 7.21% last week, but rates remained more than a full percentage point higher than a year ago, despite mixed data on the health of the economy and signs of a cooling job market.”
Experts generally predict that rates will come down sometime at the end of this year or in early 2024. Preston Caldwell, a senior U.S. economist for Morningstar Research Services LLC, sees inflation cooling to the Fed’s target 2% around that time, though he ceded that “it’s hard to predict” the exact timeline.
Analysts are hedging their bets on how fast inflation may come down after predictions about 2023 were shown to be too optimistic.
“There was a belief that once the second half of 2023 came around, rates would’ve been lower than they were at the end of 2022. But it hasn’t come down. These things take a long time to work their way through the economy, so sometime in 2024 sounds about right,” Elliot Eisenberg, the Chief Economist at Graphs and Laughs, told CNBC.
Refinances continue to suffer as many homeowners cling to the low rates they locked in during the pandemic.
Conventional refinances took a hit, Kan noted, forcing overall refinances down 5% to their lowest level since January 2023. They currently make up 30% of total applications. In the past decade, refis averaged 58% of total activity.
The FHA share of total applications rose to 13.7% from 13.2%. Government applications have seen a boost in four of the last five months as buyers seek out ways around the affordability crisis.
ARM applications fell to 6.7% of total applications. The VA’s share fell to 11.3% from 11.6%, while the USDA’s share increased from 0.4% to 0.6%.
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