Home purchase volume pulled back a bit this week despite another dip in mortgage rates, a reaction indicative of the inventory and affordability troubles continuing to burden the typically busy spring market.
Mortgage applications decreased 4.1% from one week earlier, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association’s (MBA) for the week ending March 31, 2023.
This week’s numbers:
- The Market Composite Index, a measure of mortgage loan application volume, decreased 4.1% on a seasonally adjusted basis from one week earlier.
- On an unadjusted basis, the Index decreased 4% compared with the previous week.
- The Refinance Index decreased 5% from the previous week and was 59% lower than the same week one year ago.
- The seasonally adjusted Purchase Index decreased 4% from one week earlier.
- The unadjusted Purchase Index decreased 3% compared with the previous week and was 35% lower than the same week one year ago.
- The refinance share of mortgage activity decreased to 28.6% of total applications from 29.1% the previous week.
- The adjustable-rate mortgage (ARM) share of activity decreased to 7.2% of total applications.
- The FHA share of total applications decreased to 12.0% from 12.3% the week prior.
- The VA share of total applications decreased to 11.0% from 11.6% the week prior.
- The USDA share of total applications increased to 0.6% from 0.5% the week prior.
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.40% from 6.45%, with points decreasing to 0.59 from 0.62 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
- The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200)increased to 6.36% from 6.27%, with points decreasing to 0.47 from 0.54 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 6.33%, with points decreasing to 0.92 from 0.93 (including the origination fee) for 80% LTV loans. The effective rate remained unchanged from last week.
- The average contract interest rate for 15-year fixed-rate mortgages increased to 5.97% from 5.84%, with points decreasing to 0.54 from 0.57 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
- The average contract interest rate for 5/1 ARMs decreased to 5.61% from 5.62%, with points increasing to 1.02 from 0.91 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
MBA’s take:
“Spring has arrived, but the housing market is missing the customary burst in listings and purchase activity that typically mark the season. After four weeks of increasing purchase application activity, volume declined a bit this week even with another small drop in mortgage rates,” said Mike Fratantoni, MBA’s SVP and chief economist. “Additionally, refinance application volume continues to be quite low. Although the mortgage rate for conforming balance loans declined by five basis points over the week to 6.40%, the mortgage rate for jumbo loans increased by nine basis points to 6.36%. While we have seen relative weakness at the high end of the housing market in recent months, the divergence in rates suggests that banks may be tightening credit in response to recent challenges, preserving balance sheet capacity as deposit balances have declined. In recent years, most jumbo loans have been kept on depository balance sheets.”
Added Fratantoni: “At the entry-level segment of the market, purchase applications for both FHA and VA loans decreased last week. We do expect strong demand from first-time homebuyers over the next several years given the large number of millennials hitting peak first-time homebuyer age, but affordability remains a real challenge in this environment.”
