Mortgage applications continued to sink last week, driven by continued refinance weakness.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – fell by 0.8%, down slightly compared to the week prior’s 2.9% decrease.
Adjusted purchase applications actually rose by 1%, while the unadjusted index dipped 11% from the week before and was 27% lower YOY.
Refinances drove the decline, dropping 5% and seeing their weakest levels since the beginning of this year. They currently make up 29.1% of total applications. In the past decade, refis averaged 58% of total activity.
The refi downturn led to the seventh dip in applications in eight weeks and their lowest levels since 1996.
Meanwhile, the average interest rate for a 30-year fixed loan increased to 7.27%.
“The 30-year fixed mortgage rate… was 40 basis points higher than where it was in late July. Purchase applications increased over the week despite the increase in rates, pushed higher by a 2% gain in conventional loans,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
“Given how high rates are right now, there continues to be minimal refinance activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate.”
Some homeowners are being forced to sell, however, even at a loss.
Redfin reported that one in every ten sellers is motivated by a back-to-work mandate making them choose between their home and their job.
“My sellers both work at the same company, which told them they have to be in the office three days a week or they’ll lose their jobs. They have six months to make the move,” Boise, ID, real estate agent Shauna Pendleton said.
“They’ll probably have to take a $100,000 loss on their home. Their new house in Seattle won’t be anything close to the size of their property in Boise, and their mortgage rate will be much higher.”
This may be good news for buyers. Zillow saw an unexpected 4% increase in existing home listings in August, and homebuilders continue producing new inventory.
As buyers’ options expand, prices should moderate. Rates are also expected to fall by year-end.
The FHA share of total applications rose to 14.2% from 13.7%.
Government applications have seen a boost in four of the last five months as buyers seek out ways around the affordability crisis.
ARM applications rose to 7.5% of total applications. The VA’s share remained unchanged at 11.3%, while the USDA’s share decreased to 0.4% from 0.6%.
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