Applications Turn Tail As Price Appreciation Deters Buyers

Mortgage applications reversed course last week, turning down after getting a refi-inspired boost the week prior.

The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — fell by 2.2%, cutting into its 3.9% increase.

Adjusted purchase applications decreased by 4%, while the unadjusted index was down 4% and 15% lower YOY.

Rates drifted further down, with the 30-year fixed rate averaging 6.82%, its lowest level since February. While refinances ticked up, they didn’t increase enough to offset poor purchase application performance.

Refinances increased just 0.3%, a major turnaround from the week prior’s 15% bump, and were up 38% from the same time last year. They accounted for 39.7% of applications.

“Purchase applications decreased as ongoing affordability challenges persist with rates at their current levels and with home-price appreciation still strong in many markets,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

“Refinance applications were up, driven by conventional and FHA application activity, as some borrowers took the opportunity to act. Furthermore, the conventional refi index was at its highest level since September 2022.”

Listings are going stale as buyers turn tail from high prices, Redfin says. Nearly 65% of homes on the market in June spent more than 30 days listed without going under contract.

“A lot of sellers are willing to let their home sit on the market until they get the price they want, and a lot of buyers aren’t willing to pay sky-high prices when mortgage rates are still high. My advice to serious sellers is to price fairly and make cosmetic repairs before listing,” Shay Stein, a Redfin Premier agent in Las Vegas, noted.

Fannie Mae predicts there will be two rate cuts from the Central Bank this year, contributing to cooling rates and likely invigorating the housing market. But big changes aren’t expected to happen soon.

Prospective buyers are tuned into record-high prices and recent mortgage rate declines. They appear to be waiting to see how far rates will fall before committing to an expensive house.

“This is not uncommon: sometimes as rates decline, demand weakens, and the apparent paradox is driven by buyers making sure rates don’t decline further before they decide to purchase,” Sam Khater, Freddie Mac’s Chief Economist, said of the trend.