The government shutdown reaches its 15th day, leaving the housing market scarce as new pending sales pull back and buyer traffic slows down. With an unclear future for when the shutdown will end, mortgage applications decrease for the third consecutive week.
The Mortgage Bankers Association (MBA) reports that the market composite index—the measure of mortgage loan application volume—decreased 1.8% on a seasonally adjusted basis for the week ending Oct. 10. The market index decreased 2% from the previous week on a seasonally unadjusted basis.
The severity of the market index’s decline continues to slow, as the previous survey reported a 4.7% decrease to the market index.
Joel Kan—MBA’s vice president and deputy chief economist—explained that although the mortgage rate went down slightly last week, applications are not yet seeing week-over-week growth.
“Mortgage rate movements were mixed last week, with the 30-year fixed rate decreasing slightly to 6.42%. Mortgage applications were lower than the week before, as conventional and VA applications saw declines,” he said.
On both a seasonally adjusted and unadjusted basis, all market composite indexes declined. The purchase index decreased 2.7% on a seasonally adjusted basis and the refinance index decreased only 1%. Despite the slight drops, the purchase index is 20% higher than the same week one year ago, and the refinance index is 59% higher than last year.
“Purchase applications declined for the third consecutive week but remained 20% ahead of last year’s pace as improving inventory conditions in certain markets continue to maintain homebuyer interest,” Kan added.
The share of refinance applications increased slightly from last week, going from 53.3% the previous week to 53.6% currently. Adjustable-rate mortgages (ARM) saw a slight decrease in both activity and shares. The ARM index decreased by about 4% on both a seasonally adjusted and unadjusted basis since the previous week. Its share of total applications decreased to 9.3%, after being 9.5% in the previous week’s results.
Despite the slow down, activity for ARMs is 117% greater than the same period one year ago. Aligning with the previous week’s results, FHA loans were the only government-backed loans to increase in the recent survey.
“FHA applications saw a stronger week, and FHA refinance applications in particular increased 12% as the FHA rate stayed more than 10 basis points lower than the conventional fixed rate,” Kan said.
The FHA index increased 8.5% on a seasonally adjusted basis and at nearly the same rate on an unadjusted basis. VA loan application volume decreased by 10.4% on a seasonally adjusted basis and the USDA index dropped by nearly 10%.
Along with the increase in volume, the share of FHA applications increased to 20.5%, a 2-basis-point jump from the week prior. The share of VA loan applications decreased to 14.9%, after being 16.3% for the previous survey. USDA loan shares continue to remain unchanged at 0.4%, and have seen little movement for the last four weeks.
Although FHA loan applications are seeing positive growth in both shares and volume, FHA loans had the highest share of delinquencies in August (12%), according to the latest ICE Monthly Mortgage Monitor Report.
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