Homebuyers are retreating once more, with mortgage demand falling even as rates remained relatively stable last week.
“Applications for a mortgage to purchase a home dropped 4% last week compared with the previous week,” according to the Mortgage Bankers Association’s seasonally adjusted index. The report noted that “volume was just 3% higher than the same week one year ago, even though interest rates last year were considerably higher.”
Despite the slight decrease in rates, homebuyers are still hesitant. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances — “$806,500 or less” — “decreased to 6.89% from 6.90%, with points increasing to 0.67 from 0.66, including the origination fee, for loans with a 20% down payment.” That rate is “40 basis points lower than the same week one year ago.”
Economic and Labor Market Concerns Slow Purchase Activity
Joel Kan, vice president and deputy chief economist at the MBA, stated, “Mortgage application activity, particularly for home purchases, continues to be subdued by broader economic uncertainty and signs of labor market weakness, dropping to the slowest pace since February.”
Kan noted that “with slowly-increasing housing inventory in many markets and first-time homebuyers still in the mix, FHA purchase applications fared better with only a slight decline.”
Refinance Applications Also Slip
The retreat isn’t limited to purchase applications. “Applications to refinance a home loan dropped 4% for the week and were 42% higher than the same week one year ago.”
Kan added, “Refinance activity dipped again, as mortgage rates remained close to 7%, and borrowers hold out for a bigger decline in rates.” He also noted that “given the pullback in refinancing, the average loan size for refinances declined to just under $290,000, the lowest level in three months.”
Market Awaits Economic Data for Direction
“Mortgage rates remained in limbo to start this week,” but analysts suggest that movement could be coming soon. “A slew of economic data will be released, ending Friday with the all-important monthly employment report,” which could influence the future direction of mortgage rates.
