MBA Survey July 19, 2023: Mortgage Applications Surge

Mortgage applications increased by 1.1% from the prior week, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for July 14, 2023. On a seasonally adjusted basis, the Market Composite Index—which gauges the volume of home loan applications—rose 1.1% as well. However, the seasonally adjusted Purchase Index fell by 1%, showing that the low housing supply and higher rates relative to the prior year continue to impede house purchase activity.

Joel Kan, MBA Vice President, and Deputy Chief Economist, reported that mortgage rates declined due to positive market responses to cooling U.S. inflation. Despite lower rates, purchase applications decreased, while refinance applications increased by more than 7%. However, refinance activity accounted for only 28% of applications, lagging behind last year’s pace by more than 30%.

The refinance share of mortgage activity increased to 28.4%, and the adjustable-rate mortgage (ARM) share of activity decreased to 6.3%. The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.87%, dropping to 6.89% for jumbo loan balances. For 30-year fixed-rate mortgages backed by the FHA, the average contract interest rate fell to 6.77%. The average contract interest rate for 15-year fixed-rate mortgages decreased to 6.36%, and for 5/1 ARMs, it increased to 6.27%.

Fannie Mae and Redfin Report Rising Home Prices

According to Fannie Mae’s Home Price Index, the second quarter of 2022 saw a 3% increase in single-family home prices. However, this rise was less than the 4.9% annual growth rate previously estimated for the quarter. Home prices increased quarterly by 1.9% (seasonally adjusted), an improvement above the 1.3% in the first quarter. Due to the high demand for housing and the few available existing homes for sale, there is a “lock-in effect,” where homeowners are reluctant to sell because of the high mortgage rates, further reducing the supply.

On the other hand, according to Redfin, during the four weeks ending on July 9, the average price of homes sold in the United States rose 1.5% annually. It had been over five months since there had been an increase in this statistic. For the median house buyer, the rising prices have led to an almost record-high monthly payment of $2,627. Redfin also observed a sizable decline in new listings, down 27% year over year, and a 14% drop in the overall number of homes on the market. Despite this, there is some solace in recent reports that inflation is slowing, which may cause a minor drop in mortgage rates. However, these rates will likely stay around 6% until the Federal Reserve sees several more months of inflation readings closer to their objective.

WSJ: Fed Rate Hike All But Decided

The Federal Reserve is set to meet later this month, and it appears highly likely that they will implement another quarter-percent interest rate increase, according to the Wall Street Journal’s Nick Timairos. This increase would bring the Fed’s rate to a 22-year high, with many officials already expressing support for it. The debate during the meeting may focus on the possibility of additional rate hikes in September or the fall.

Inflation slowed down last month, leading to speculation that if the rate hike occurs, it might be the Fed’s final upward move. In June’s meeting, most officials expected two more rate increases this year if the economy grows moderately and inflation pressures ease. Fed Chair Jerome Powell indicated that the pause in rate hikes last month was to assess the impact of the Fed’s previous actions and to consider the economic consequences of three bank failures earlier in the year. However, Powell is expected to take a neutral position on the rate hike question during the upcoming July 26 press conference.

Source:

Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.