Mortgage demand declined last week even as mortgage rates decreased, according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.
For the week ending March 22, total mortgage demand decreased 0.7% compared to the prior week, the survey showed.
“Affordability is taking a hit this spring home-buying season as high mortgage rates erode people’s budgets,” the Kiplinger Letter’s housing editor Rodrigo Sermeño said. “As a result, many potential homebuyers are waiting on the sidelines for mortgage rates to drop.”
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Joel Kan, MBA vice president and deputy chief economist, echoed those remarks in a statement.”Homebuyers continue to hold out for lower mortgage rates and for more listings to hit the market,” he said.
Mortgage demand activity was “muted” last week despite the slightly lower mortgage rates, Kan said “The 30-year fixed rate edged lower to 6.93 percent, but that was not enough to stimulate borrower demand,” he said.
The MBA forecast calls for rates to move toward 6% by the end of the year, Kan said.
Sermeño said that tight inventories continue to exert upward pressure on home prices.
“The supply of homes on the market, however, is showing signs of a recovery with the inventory of existing homes rising around 10% in February from a year ago,” Sermeño said. “Lower rates later this year and higher inventory of homes should help sales in the coming months.”
A March 25 report by the U.S. Census Bureau showed that the median new home sale price in February was $400,500, a decrease of 3.5% from January and a decrease of 7.6% from the same period a year ago.
“A slight uptick in mortgage rates held back the pace of new home sales in February,” Robert Dietz, National Association of Home Buildings (NAHB) chief economist, said in a statement.
“Our latest builder surveys show that roughly one-quarter of builders reported cutting home prices in March,” Dietz said. “The price cuts, in combination with building slightly smaller homes, can be seen in today’s data that show a 7.6% year-over-year decline for median new home prices.”
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Mortgage application highlights
The Market Composite Index, which measures mortgage loan application volume, decreased 0.7% on a seasonally adjusted basis from the prior week, and decreased 0.4% on an unadjusted basis, MBA said.
The Purchase Index decreased 0.2% on a seasonally adjusted basis, compared to the prior week. On an unadjusted basis, the index increased 0.2% from the prior week and fell 16% from the same week a year ago.
The Refinance Index, which measures refinancing and prepayment activity, decreased 2% from the prior week and was 9% lower than the same week a year ago. The refinance share of mortgage activity decreased to 30.8% of total applications from 31.2% the previous week.
The FHA share of total applications decreased to 12% from 12.1% the prior week. The VA share decreased to 12%, from 12.1% in the week prior, and the USDA share remained unchanged at 0.5% from the prior week.
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