Mortgage loan application volume fell last week, with both refis and purchase applications falling as interest rates hit their highest point since mid-June, the Mortgage Bankers Association’s weekly survey shows.
The adjusted Market Composite Index, a measure of mortgage loan application volume, decreased by 0.8%. The adjusted purchase index fell 1%, while the unadjusted purchase index dropped 3% and was 23% lower YOY.
The refinance index dropped by 1% and made up 30.7% of total applications, down 83% from the same time last year.
“Mortgage rates moved higher over the course of last week as markets continued to re-assess the prospects for the economy and the path of monetary policy, with expectations for short-term rates to move and stay higher for longer,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist.
“Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand. There is no sign of a rebound in purchase applications yet, but the robust job market and an increase in housing inventories should lead to an eventual increase in purchase activity.”
Annual home price growth saw its largest single-month drop since 2011 in July, and more than 85% of U.S. markets have now peaked.
Analyst Ivy Zelman – who famously called the top of the housing bubble in 2005 and the peak of the housing boom earlier this year– predicted that inventories will outstrip demand, causing home price declines to continue until 2024.
“As fast as [inventory levels] are rising and demand is plummeting, we could see pretty substantial [home] price corrections. But it’s going to vary by market,” Zelman said in an interview.
“I don’t think this will just end quickly. This is going to be a very pressured market nationally in 2023 and 2024.”
The FHA share of total applications rose from 13% to 13.3%. The VA share fell from 11.1% to 10.8% of total applications, and the USDA share remained unchanged at 0.6%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased from 5.80% to 5.94%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose from 5.32% to 5.46%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased from 5.57% to 5.61%, and for 5/1 ARMs rose from 4.78% to 4.81%.
ARM activity remained unchanged at 8.5% of total applications.