Rate-lock volumes fell 21.5% in November despite 30-year rates dropping 48 bps over the course of the month, according to Optimal Blue’s Mortgage Market Indices from Black Knight.
Rates are 3.3% higher YOY but have declined in recent weeks. But affordability struggle and continuing stock shortages have diminished buyer demand, pushing rate-locks down 39% in three months and 68% from the same time last year.
Purchase locks fell 22%, while rate/term refis and cash-outs dropped 17% and 18%, respectively. Total refi locks accounted for only 15% of November’s activity.
The Thanksgiving holiday and normal seasonal slowing also contributed to low lock volume, but Optimal Blue President Scott Happ noted that these cannot account for dwindling activity by themselves.
“While we would normally expect some seasonal pullback in activity in November, we are also seeing exceptionally strong headwinds in purchase activity from continued affordability challenges and a refinance market that has dwindled to all but nonexistent levels,” Happ said.
“Stalled inventory and rates nearly twice what they were a year ago are combining to negate the benefits of recent home price and rate declines from an affordability perspective.”
The inventory of homes for sale increased recently, but this was largely the result of homes lingering on the market. New listings declined in the same period by 20%, suggesting the stock shortage will be ongoing.
Home price appreciation is now half of what it was in April, its lowest recorded point since early 2021.
The dollar value of locks has declined 37% in three months and more than 50% YOY.
ARMs, which gained some popularity this year as rates soared, fell from 13% of lock activity to 10% as fixed rates fell back below 7%.
Both the average purchase price and average loan amount fell in November, to $414,000 (-1.3%) and $340,000 (-2.2%).