For the second week in a row, mortgage application volume is up, as reported by the Mortgage Bankers Association (MBA) app volume up 4.2% week by week for the week ending June 17, 2022.
While mortgage rates took a dramatic higher turn last week, as expected, the refi market continues to fall as expected, with the MBA Refinance Index falling 3% from the previous week and 77% compared to the same week a year ago.
As the refinance share of mortgage activity declined to 29.7% of total applications from 31.7% the previous week, the rapid rise in rates is once again inflaming the share of interest rate mortgage activity (ARMs), with ARMs reaching 10.6% of total mortgage applications.
“Shopping apps grew for the second consecutive week, driven primarily by conventional apps, and the share of ARM apps rebounded to over 10%,” said Joel Can, associate vice president of MBA economic and industrial forecasting. “However, buying activity was still 10% lower than a year ago as inventory shortages and rising mortgage rates dampen demand. The average loan size, at just over $420,000, is well below its peak of $460,000 earlier this year, and is potentially a sign that home price growth is slowing.
By loan type, the FHA share of total applications increased to 12% from 11.8% the previous week, and the VA share of total applications decreased to 10.7% from 11.7% the previous week. USDA’s share of total claims fell slightly to 0.5% from 0.6% the previous week.
“Mortgage rates continued to rise last week, with the 30-year fixed mortgage rate jumping 33 basis points to 5.98%, the highest since November 2008 and the biggest one-week increase since 2009. “Kan added. “All other types of lending also rose by at least 20 basis points, influenced by the Federal Reserve’s 75 basis point rate hike and comments that others are coming in to curb inflation. Mortgage rates are now nearly double what they were a year ago, resulting in a 77% drop in refinance volume over the past 12 months.
As Kan noted, the Federal Reserve’s decision to rein in inflation last week by raising the nominal interest rate by 75 basis points, marking the biggest rate hike seen since the November 15, 1994 meeting. of the Federal Open Market Committee (FOMC) was expected. to send a ripple through the housing market.
As Kan said, the average loan size – just over $420,000 – is about $40,000 lower than its peak of $460,000 earlier this year, a potential sign that home price growth is slowing. . The downward trend in prices is symbolic of the slowdown in the real estate market. Many buyers are recoiling in the face of soaring home prices, soaring mortgage rates, high inflation and a shaky stock market.
Home price declines have become increasingly common across the United States, especially in parts of Utah and other mid-size metro areas in the West, according to a new report from Redfin. About half of the metros surveyed by Redfin saw more than 25% of home sellers drop their asking price in May. More than 10% of home sellers lowered their prices in the 108 metros, bringing the national share of price cuts to a record high.
“There are two types of sellers in today’s market: those who already know the market has cooled and those who learn about the cooling market during the selling process,” noted Redfin’s chief economist. Daryl Fairweather. “The former want to sell quickly before the market slows further and are ready to immediately price slightly below comparable homes in their neighborhood, and the latter may have to lower their price if their home doesn’t attract sales.” buyers in a few weeks.. As more sellers come to terms with the market downturn, fewer homes will see price drops.