Applications Turn Around After Four Weeks Of Declines

Mortgage applications turned around after four weeks of declines as rates dipped slightly.

The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – increased by 7.2%.

Adjusted purchase applications rose by 8%, while the unadjusted index was up 17% from the week before and 27% lower YOY.

The average interest rate for 30-year fixed loans fell for a second week from 6.81% to 6.77%.

Though it’s not a huge drop, any dip will pull some rate-sensitive buyers off the sidelines.

“Rates that are still more than a percentage point higher than a year ago, and low for-sale inventory continue to constrain homebuying activity in many markets. The average loan size on a purchase loan decreased for the third straight week, as we continue to see more first-time homebuyer activity in the purchase market,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

First-time homebuyers are conscious of market pressures, and many are specifically looking for lower-priced properties. But the majority feel that homeownership is a good long-term investment and are optimistic about their ability to buy even in the current market.

Rising expenses seem to have played a major role in pushing these buyers into the market. Rent prices were a big reason respondents to a recent survey decided to forge ahead with homeownership despite rates and high home prices.

Refinances also saw improvement, up 6% from the week prior. They remain 41% lower than the same time last year, comprising only 27.3% of total applications. In the past decade, refis averaged 58% of total activity.

“Refinance applications accounted for less than a third of all applications and remained more than 40 percent behind last year’s pace,” Kan said.

“Elevated rates have reduced the benefit of a rate/term refinance for many borrowers and continue to discourage cash-out refinances as borrowers are unwilling to give up their lower rates.”

The FHA share of total applications fell from 13.2% to 13%, with an average interest rate of 6.70%. The VA share increased to 12.6% from 12.5%, and the USDA share fell from 0.5% to 0.4%.

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