Mortgage Applications Rise 2 But Buyers Seem Unimpressed By Lower Rates

Dated: 12/05/2018

Views: 20

  • Mortgage rates fell for the third straight week, reinvigorating the refinance business.

  • But that isn't bringing many more buyers back to a very expensive housing market.

  • Affordability is still at the lowest level in a decade and proving to be the biggest barrier to housing demand.

Mortgage rates have now been falling for three straight weeks and that is reinvigorating the refinance business. It is not, however, bringing many more buyers back to today's very expensive housing market.

Total mortgage application volume rose 2 percent last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was nearly 19 percent lower than the same week one year ago.

Refinance activity drove the volume, increasing 6 percent for the week. Refinances are highly rate-sensitive week to week, as borrowers seek to save money on monthly payments. Volume was still 36 percent lower than a year ago, when interest rates were lower.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 5.08 percent last week from 5.12 percent the previous week, with points decreasing to 0.44 from 0.46 (including the origination fee) for loans with a 20 percent down payment.

"Treasury rates continued to slide last week, driven mainly by concerns over slowing global economic growth and U.S. and China trade uncertainty. The 30-year fixed-rate fell for the third week in a row," said Joel Kan, MBA's associate vice president of economic and industry forecasting.

Mortgage applications to purchase a home rose just 1 percent for the week and were 0.2 percent higher than a year ago. Mortgage interest rates are still 89 basis points higher than a year ago and home prices are still gaining, making home buying ever more expensive. While the price gains are now shrinking, affordability is still at the lowest level in a decade and proving to be the biggest barrier to housing demand today; sales of both newly built and existing homes continue to suffer because of it.

Luxury homebuilder Toll Brothers saw new orders decline this fall, according to its earnings release this week. CEO Douglas Yearley blamed higher mortgage rates and high prices in California, where it sells a large share of its homes. Luxury buyers, it seems, are not exempt from today's weaker affordability, and that is showing up in the size of loans for which borrowers are applying.

"We saw a decrease in the average loan size for purchase applications to the lowest since December 2017 ($298,000 from $313,000)," Kan said. "This is perhaps an indication that there are fewer jumbo borrowers, or maybe first-time buyers are having better success reaching the market as we close out the year."

Mortgage rates continued to slide this week, falling to their lowest level in two months on Tuesday as the U.S. stock market sold off sharply and bond yields fell.

"Mortgage rates didn't experience nearly as big of a move as the broader bond market," said Matthew Graham, chief operating officer for Mortgage News Daily, noting that economic data at the end of the week, specifically the U.S. monthly employment report, could cause more dramatic moves. "If it's weaker than expected, rates could easily continue lower, but if it surprises to the upside, the bounce back in rates could be somewhat abrupt."

Blog author image

Chad Arend

Chad grew up in the Phoenix area, and can't imagine living anywhere else. After working in finance for 6 years, he decided to make the move to real estate in late 2004. Real Estate runs in his family,....

Latest Blog Posts

Inside Or Outside Of The Phoenix Area

 The ranking table of annual average price per square foot has been published for March and it is striking how much the outlying areas have out-performed the inner parts of the valley

Read More

The Cromford Market Index Values For The 17 Largies Cities In AZ

March 14 - The Cromford® Market Index values for the single-family markets in the 17 largest cities are shown below:This shows that the recent strength in the market is intensifying with 12

Read More

These Are The Best And Worst Cities For Firsttime Home Buyers

for first-time home buyers. California is the state where new home purchasers are most likely to feel buyer's remorse, with six out of 10 of the bottom cities hailing from that state. Overlooked

Read More

5 Tips To Update Your Shower On A Budget

Want to update your shower? It’s not as costly as you may think.Has your shower seen better days? Wondering what you can do with a small budget?Look no further. We understand how hard it can

Read More