Mortgage applications fell last week, even as rates hovered at their lowest level since early September. The drop illustrates the volatility in housing demand, a trade group’s deputy chief economist said.
The Mortgage Bankers Association’s composite index, which tracks the weekly volume of applications for home purchase and refinance loans, fell 9% on a seasonally-adjusted basis last week, the trade group said. Refinance volume dropped 7%, while purchase loan volume fell a seasonally-adjusted 10%, according to the trade group’s data. On a year-over-year basis, the refinance index was 80% lower, while the purchase index was 41% lower.
The drop in application volume does not appear to have been driven by a rise in rates. The average rate on a 30-year fixed-rate mortgage last week was 6.19%, the association said, the lowest rate measured by the trade group since early September.
Rather, the drop comes down to volatility, Joel Kan, the trade group’s deputy chief economist, said in a statement. “Overall application activity declined last week despite lower rates, which is an indication of the still volatile time of the year for housing activity,” he said.
The decline in purchase application volume follows two weeks of increases as mortgage rates dropped. The pickup in volume combined with other data points, such as a December increase in pending home sales, to offer an early indication that buyers were responding to lower mortgage rates. While the trade group’s purchase application index snapped its two-week streak of gains, it’s still 16% off its multiyear low set in the first week of January, according to the association’s data.
Kan said he expects slower price growth and lower rates to lure buyers back into the housing market during the spring season.
“Mortgage rates declined for the fourth straight week and have now fallen almost 40 basis points over the past month,” the economist said, adding that the unusually wide spread between the 30-year fixed-rate mortgage and the 10-year Treasury has narrowed recently. “Further narrowing of that spread is expected to put downward pressure on mortgage rates in the coming months.”
Write to Shaina Mishkin at firstname.lastname@example.org