Hey there, have you heard the latest news from the Mortgage Bankers Association (MBA)? It turns out that there’s been a drop in the volume of mortgage applications recently. As of the week ending May 12, 2023, there was actually a 5.7% decline across the nation. It seems that the springtime homebuyers are playing it safe this year.
Looking at specific numbers, the Refinance Index went down by 8% from the week before and was a significant 43% lower than the same week last year. That’s not all; the Purchase Index, when seasonally adjusted, fell by 4.8% compared to the previous week. Even the unadjusted Purchase Index dipped by 5% week-on-week, which, when compared to the same week last year, has dropped by a notable 26%.
Do you know what’s interesting? Joel Kan from the MBA pointed out that despite flat Treasury yields, mortgage rates went up, causing a 310-basis point spread. This ended up slowing down the mortgage application activity. The 30-year fixed rate even rose by nine basis points, hitting its highest point in two months at 6.57%. And so, the purchase applications took a bit of a hit, slowing down by 5%. It’s the slowest pace we’ve seen in a month. All these fluctuations and the limited inventory have made buyers a bit more cautious.
As for mortgage activity, the amount coming from refinancing has dropped to 27.4% from last week’s 28%, and the share of adjustable-rate mortgage activity fell to 6.5%.
When looking at the types of loans, the proportion of FHA applications dropped just a tad from 12.1% to 12%, while the VA’s share also went down from 12.9% to 12.2%. The USDA’s share stayed the same though, at 0.4%.
Redfin chipped in some information as well, indicating that a combination of the higher mortgage rates and lack of inventory is making things tougher for home sales, even in what’s usually an active spring season. Over the four weeks ending on May 7, new home listings dropped by a whopping 19% compared to last year, leading to a surprise decrease in total inventory. And get this, pending home sales fell by 16% compared to last year. It seems like potential buyers are getting a bit hesitant with mortgage rates going over 6%. Interesting times, don’t you think?
