MBA Survey Reveals Fall in Weekly Mortgage Applications

Investments July 24, 2018

2.5% Fall in Applications

A recently release Survey indicates that the increasing demand for homes has had no positive effect on home sales because of the high prices of purchasing homes. The Mortgage Bankers Association reported that the mortgage applications fell by 2.5% in this past week on the basis of seasonal adjustment. Sources also claimed that an absence of buyers solely accounted for the fall. As such, the whole volume was pegged at 12% lower than what was recorded in the same week in 2017.

The Mortgage applications for home purchase for the week reduced by 5% making the total applications only 1% higher than the figure recorded in 2017. Media outlets reported that home process has continued to increase at a rate which is two times as much as the rate of income growth. Besides, bidding wars for entry-level homes have reportedly become the order of the day, an occurrence which used to happen only in exceptional cases in the past. The reports also indicate a clear example of financial struggle on the part of new entrants into the housing industry as evidenced by the kind of loans products for which homebuyers apply.

According to Mike Fratantoni, a chief economist at the MBA, there has apparently been a change with the increasing FHA purchase volume being the norm and a lowering in the VA volume. He noted that it was an indication that there is still a growing number of first-time buyers coming into the housing market even though the market in its entirely has continued to suffer from restrictions caused by tight inventories on the houses that are up for sale.

Mike Fratantoni stated that the current happenings indicated that there has apparently been a change with the increasing FHA purchase volume being the norm and a lowering in the VA volume

Preference for FHA Loans

It will be noted that the government insures FHA mortgages and they allow down payments that are as low as 3.5% which, however, requires mortgage insurance which increases the monthly cost. However, FHA loans are still the first points of call for first-time home buyers with low credit scores.

Analysts have noted that the loan a borrower opts for has a far more noticeable difference in the monthly payment as compared to the weekly interest rates which asl ran flat in this past week.

In addition, the avg. interest for fixed-rate mortgages (30 years) with conforming loan balances i.e. $453, 100 rose from 4.76% to 4.77%, and with the inclusion of the origination fee, the points increased from 0.43 to 0.46 for 80% LTV ratio loans.

Also, the avg. interest for fixed-rate mortgages (30 years) from the FHA plunged from 4.80% to 4.78%, and with the inclusion of the origination fee, the points decreased to 0.69 from 0.75 for 80% LTV ratio loans.

Similarly, the avg. interest for fixed-rate mortgages (15 years) rose from 4.18% to 4.22% and with the inclusion of the origination fees, the points decreased from 0.46 to 0.42% for 80% LTV ratio loans.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances i.e. $453, 100 rose from 4.76% to 4.77%

Refinance Volume

Sources claimed that the mortgage rates have remained unchanged in the past month and this static record may account for why refinance applicants are not making any moves. Although the applications rose 2% higher in the week, they were, however, still 28% lower than what was recorded in the same week last year when there were lower interest rates.

The Refinance volume has not been doing so well and analysts stated that it was because several homeowners refinanced years ago when the rate on the 30-year fixed was in the range of 3% and not the current 4%. In this last week, there was an increase in the refinance share of mortgage activity to 36.5% of all applications received from 34.8% that was recorded the week before.

Media outlets reported that the shortage of houses for sale isn’t getting better even though more homes are being put up for sale. It was also recorded that inventory is still considerably lower than what existed a year ago and what is available is still very expensive.

The Survey showed that the total applications gotten by the FHA rose from 10.0% the previous week to 10.6% last week. The total applications gotten by the VA reduced to 10.2% from the 11.3% recorded the previous week. The total applications gotten by the USDA also decreased to 0.7%from 0.8%.