MBA Weekly Applications Survey April 20, 2022: Rising Mortgage Rates Push Down Applications. Market Composite Index down 5.0 percent from the previous week on a seasonally adjusted basis.

Rising mortage rates

MBA Weekly Applications Survey April 20, 2022: Rising Mortgage Rates Push Down Applications

Mortgage application activity fell last week due to the highest mortgage rates in more than a decade, according to the Mortgage Bankers Association’sAssociation’s Weekly Mortgage Applications Survey for the week ending April 15TH.

The Market Composite Index fell 5.0 percent from the previous week on a seasonally adjusted basis. The refinance share of mortgage activity decreased to 35.7 percent of total applications from 37.1 percent as Refinance Index dropped by 8 percent. Moreover, the seasonally adjusted Purchase Index also fell by 3 percent.

Ongoing concerns about rapid inflation and tighter U.S. monetary policy continued to push Treasury yields higher, driving mortgage rates to their highest level in over a decade,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The 30-year rate has increased 70 basis points over the past month and is two full percentage points higher than a year ago. The recent surge in mortgage rates has shut most borrowers out of rate/term refinances.

Homeowners Don’t Want To Sell, Prices Will Likely Remain High

The housing market in the United States has been troubled by a record-low inventory of homes for sale for months, resulting in heightened competition and record-high prices. As a result, home prices have risen 19.2 percent in the last year, putting many potential buyers out of the market. With prices beginning to slow, the housing market appears to be entering a cooling period. However, the number of homes for sale continues to be insufficient. Moreover, two new housing reports imply that the same policy now cooling the housing market may prevent inventories from rebounding.

Over the last five years, two variables have converged to push prices this high. First, the early-pandemic low mortgage rates stimulated demand for housing, while the supply of new homes remained at historic lows, resulting in intense competition and higher prices. However, that relationship is now crumbling, and the equation is shifting.

Low mortgage rates used to be the safety net that allowed people to buy houses even when they couldn’t afford them. That cushion is now gone, as most current homeowners enjoy fixed rates that are substantially lower than what they would face if they were to sell. More listings and homes on the market would significantly reduce competition, provide buyers more bargaining power, and keep prices in check. New house construction starts in the United States are steadily increasing, which is a positive indication. Still, supply will remain tight until current homeowners return to the market, which means prices will likely remain high.

Builder Confidence Remains Resilient Despite Rising Rates

Although mortgage rates are at their highest in over three years, the housing industry has yet to show symptoms of trouble. The NAHB/Wells Fargo Housing Market Index (HMI) released in April is the most recent data to support that premise.

While the headline HMI number is identical to builder confidence, it is still in comparatively high territory, down marginally from the previous month’s reading. The HMI and the “buyer traffic” indicator were more significant than before the covid-fueled real estate boom.

While the 6-month forecast isn’t as optimistic as the other HMI components, it has improved from last month. The industry faces significant headwinds due to the high rate of home price rise mixed with one of the most considerable mortgage rate spikes in history. As a result of these challenges, the HMI has fallen from recent highs. However, the fact that those levels are still high by historical standards reflects resilience. But despite this, NAHB Chief Economist Robert Dietz was not optimistic. He stated that “the housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices, and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market.”

Next week’s potential market-moving reports are:

  • Monday, April 25th – No Report
  • Tuesday, April 26th – U.S. Home Price Index, New Home Sales
  • Wednesday, April 27th – Pending Home Sales Index, Home Ownership Rate
  • Thursday, April 28th – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, April 29th – Employment Cost Index, PCE Price Index

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.