But promising jobs report and additional housing supply expected to boost demand
Mortgage applications tumbled 0.8% for the week ending September 2, data from the Mortgage Bankers Association’s latest survey has revealed.
Overall application volume was down 0.8% on a seasonally adjusted basis week over week and down 2% on an unadjusted basis. According to MBA chief economist Mike Fratantoni, the decline was mainly driven by the steady increase in interest rates, slightly offset by the healthy August jobs report.
“Mortgage rates moved higher over the course of last week as markets continued to re-assess the prospects for the economy and the path of monetary policy, with expectations for short-term rates to move and stay higher for longer,” Fratantoni said. “With the 30-year fixed rate rising to the highest level since mid-June, application volumes for both purchase and refinance loans dropped.”
Read more: Thirty-year mortgage rate sees 11 basis point rise
MBA’s refinance index dipped 1% from the previous week and was 83% lower than the same period a year ago. The seasonally adjusted purchase index dropped 1% and down 3% when unadjusted. Compared to last year, purchase applications were down by 23%.
“Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand,” said Fratantoni. “There is no sign of a rebound in purchase applications yet, but the robust job market and an increase in housing inventories should lead to an eventual increase in purchase activity.”
The refi share of mortgage activity inched up four basis points to 30.7% of total applications, and the adjustable-rate mortgage (ARM) share of activity remained unchanged at 8.5%. The FHA and VA shares of total applications fell to 13.3% and 10.8% week over week, respectively. The USDA portion hovered at 0.6% from the week before.
“Spending was likely even lower as housing demand, especially for new homes, has fallen rapidly,” said Ricky Goyette, an associate at Fannie Mae’s Economic and Strategic Research Group. “This is consistent with our view that declines in residential fixed investment, which historically lead to broader economic downturns, likely portend a recession.”
