Weekly mortgage demand from homebuyers drops 12%

A sign of a house for sale is pictured in Alhambra, California on May 4, 2022.

Frederic J. Brown | AFP | Getty Images

Mortgage rates actually fell slightly last week, but the damage has already been done to housing affordability. Demand for refinance and purchase loans fell, leading to an 11% drop in total mortgage application volume for the week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Mortgage applications for home purchases were down 12% week over week and 15% from the same week a year ago. It was the first weekly decline in buyer demand since the third week of April. Mortgage rates are up more than 2 percentage points since the start of the year, and house prices are up more than 20% from a year ago.

The average contract interest rate for 30-year fixed rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.49% from 5.53%, with points dropping from 0 .73 to 0.74 (including origination fees) for loans with a 20% decline. Payment.

Inflation also doesn’t help consumers feel particularly good.

“General uncertainty about the short-term economic outlook, along with recent stock market volatility, may cause some households to delay their search for housing,” said MBA economist Joel Kan.

Home loan refinance applications continued their landslide, dropping another 10% week-over-week. Refinancing demand was 76% lower than the same week a year ago. Two years of record low interest rates during the Covid pandemic sparked a refinancing boom that has now gone bankrupt. There is simply a very small group of borrowers who can now benefit from refinancing.

Although down very slightly from the previous week, the share of adjustable rate mortgages in total applications remained high at 10.5%. It was around 3% at the start of this year. ARMs offer lower interest rates and can be fixed rate for up to 10 years.

Mortgage rates rose again on Tuesday, after strong retail sales data and comments from Federal Reserve Chairman Jerome Powell, who said the Fed would not hesitate to continue raising interest rates until inflation drops.

The weekly drop in demand for mortgages from homebuyers is consistent with another report released Tuesday by the country’s homebuilders. They reported a dramatic drop in both buyer traffic and current selling conditions, according to the National Association of Home Builders. Builder sentiment fell to its lowest level in nearly two years.

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