Purchase Applications Slip, Refis See Boost

Mortgage applications rose slightly last week, buoyed by a refi turnaround even as purchase demand faltered.

The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — rose by 0.5%, adding to last week’s 2.6% increase.

Adjusted purchase applications declined, however, by 2%, while the unadjusted index was down 2% and 17% lower YOY. Refinances instead drove the rising data this week.

Rates declined for a second week, down another 10 BPS to 7.08%, their lowest level since April.

“The decline in rates led to a small boost to refinance applications, including another strong week for VA refinances. However, the overall level of refinance activity remains low. Purchase applications decreased, driven largely by a 9% drop in FHA purchase applications. Conventional home purchase applications were down around one percent,” said Joel Kan, MBA’s vice president and deputy chief economist.

Refinances were up 5% and 7% from the same time last year. Refis accounted for 32% of applications, an improvement but still far below historical levels.

Affordability is a major issue for the average buyer, who is facing record-high home prices and homeownership costs.

“While the downward move in rates benefits prospective homebuyers, mortgage rates are still much higher than they were a year ago, while for-sale inventory remains tight,” Kan said.

Americans are increasingly struggling to make their payments and taking on debt to stay afloat. Many recent homeowners say they compromised on their priorities thanks to the difficult market, including spending more than they budgeted for.

And it’s not just current homeowners – 59% of prospective homebuyers say saving for a down payment makes them feel financially overwhelmed.

Half of buyers say it’s a bad time to purchase a home, and 70% are trying to “time the market” to get a deal when they do buy. On average, buyers want to pay $483,490, 2% less than the national average price of $492,300.

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