Purchase Applications Down, Wiping Out Refi Uptick

Purchase applications slipped, breaking a weeks-long upward trend, as rates barely budge and inventory shortages keep prices high.

The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – fell by 7.2%, wiping out the week prior’s 3.7% spike.

Adjusted purchase applications slipped by 11%, while the unadjusted index decreased by 6% and was 20% lower YOY. The data includes an adjustment for the MLK holiday.

Demand may have been tempered by rates ticking up slightly the week prior and hovering at 6.78%. Rates haven’t moved much in the last month, though they remain well below October 2023’s high of 7.9%.

Stock shortages and high home prices are keeping purchase demand down even as buyers have gained $40,000 in extra spending power compared to last year.

“Low existing housing supply is limiting options for prospective buyers and is keeping home-price growth elevated, resulting in a one-two punch that continues to constrain home purchase activity,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

“The average loan size for purchase applications has picked up in recent weeks to $444,100, the largest average loan size since May 2022.”

Another problem is harsh winter weather, which has kept some potential buyers off the market.

“Real estate is usually slow in the Midwest in the winter, but this year it’s even slower than usual because the weather has been so extreme,” Grand Rapids, MI real estate agent Christine Kooiker said.

Refinances have seen a little boost as rates moderate, however– they’re up by 2% and account for 34.2% of total applications, an increase. In the past decade, they averaged 58% of all activity.

In 2023, three million mortgages were originated at rates greater than 6%, with monthly payments averaging $2,201. These homeowners have plenty of incentive to refinance, even if they only save a little extra.

ARMs, meanwhile, increased to 6.6% of all applications. The share of FHA and VA loans all slipped, while USDA’s share remained unchanged.

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