Homebuying slump worsens as applications for mortgage loans drop
Purchase applications fell by 3% in first week of November
As the vote counting in last week’s presidential election slowed down, so did mortgage applications.
An index tracking the number of mortgage applications to buy homes dropped 3 percent, seasonally adjusted, compared to the prior week.
The Mortgage Bankers Association’s weekly metric, known as the purchase index, has not increased in seven weeks. Joel Kan, head of industry forecasting for MBA, said the purchase index last week was at the lowest level since May.
The “recent slump” in homebuyer activity, as Kan put it, comes despite interest rates sliding to another all-time low. The average 30-year, fixed-rate mortgage rate fell to 2.98 percent from 3.01 percent the week before. Jumbo rates declined to 3.13 percent from 3.18 percent.
Rising prices may be discouraging potential home shoppers.
“Inadequate housing supply is putting upward pressure on home prices and is impacting affordability — especially for first-time buyers and lower-income buyers,” Kan said in a statement.
Home prices have skyrocketed in recent months, driven by strong demand and low supply. MBA’s survey, which has been running weekly since 1990, follows 75 percent of the residential mortgage market. This year the average loan size has reached record highs on multiple occasions.
Pointing to those housing bellwethers, Kan noted that buyer activity “in the upper end of the market” remains strong. The purchase index, unadjusted, is up 16 percent year-over-year, he added.
MBA’s refinance index increased by 1 percent compared to the previous week, though it was up 67 percent year-over-year. That’s a lower rate of growth than in the final week of October when the index jumped by 6 percent.
Despite refinance applications making up 70 percent of the mortgages MBA’s survey tracks, the purchase index’s decline pulled down MBA’s overall index, which encompasses all home loan applications, by 0.5 percent, seasonally adjusted.