Applications Plummet As Rates Rise Again

Mortgage applications slipped again last week as rates neared 7%, with purchase apps falling to their lowest level since the beginning of June.

The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – decreased by 3%, adding to last week’s 1.18% decline.

Adjusted purchase applications fell by 3%, while the unadjusted index dipped 3% from the week before and 26% lower YOY.

The average interest rate for 30-year fixed loans rose from 6.87% to 6.93%, pushing homeownership farther out of reach for many Americans.

“The decline in purchase activity was driven mainly by weaker conventional purchase application volume, as limited housing inventory and rates still close to 7% are crimping affordability for many potential homebuyers,” said Joel Kan, MBA VP and Deputy Chief Economist.

First-time buyers need to earn 13% more to afford a typical starter home than they did at the same time last year.

With stock shortages still ravaging the market, home prices are on the rise again. The median existing-home sales price for June jumped to $410,200.

“There are simply not enough homes for sale,” Lawrence Yun, chief economist for the National Association of Realtors, said of the trend. “The market can easily absorb a doubling of inventory.”

Current homeowners with rates above 5% are nearly twice as likely to sell their homes than those with lower rates. But a majority of mortgage holders are locked in under that number, resulting in stagnating existing-home sales.

Kan added that refinance activity remains hobbled by high rates as well.

“[A]pplications trailed last year’s pace by over 30% with many homeowners not looking for refinance opportunities,” he said.

Refinances slipped by 3% and remain 32% lower than the same time last year, making up 28.9% of total applications.
In the past decade, refis averaged 58% of total activity.

The FHA share of total applications fell to 13.3% from 12.7%, with an average interest rate of 6.85%, up from 6.80%. The VA share of total applications fell to 11.6% from 12.1%, while the USDA increased to 0.7% These applications typically hover between 0.4% and 0.5%.

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