Refinances and VA loans lead decline in applications
Mortgage application activity fell last week, ending a five-week streak of increases, as mortgage rates ticked higher, according to the Mortgage Bankers Association (MBA).
MBA’s weekly mortgage applications survey for the week ending December 13, posted a 0.7% seasonally adjusted decline in the market composite index, which measures application volume. On an unadjusted basis, the index fell by 2% from the prior week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to 6.75% from 6.67% the previous week.
“Mortgage rates increased last week, leading to overall mortgage application activity decreasing for the first time in five weeks,” said MBA deputy chief economist Joel Kan.
Refinance applications dipped 3% week-over-week but remained 41% higher than the same period last year. However, the refinance share of total mortgage activity was nearly steady at 46.7%, compared to 46.8% the previous week.
Loan applications for FHA-backed mortgages increased to 17.6% of total applications, while USDA-backed loans rose slightly to 0.5%. VA loan applications, however, declined to 15.3% from 16.3% the prior week.
“Conventional and VA purchase applications drove this week’s increase in purchase activity on a weekly and annual basis,” Kan said. “Refinance applications declined last week, largely driven by VA refinances that were down 17% after two weeks of gains.”
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Meanwhile, the seasonally adjusted purchase index saw a modest 1% uptick week-over-week, although it dropped 2% on an unadjusted basis. Compared to the same period last year, the index was up by 6%.
Kan attributed the rise in purchase activity to “gradually improving inventory conditions and a more positive outlook on the economy and job market.”
New home purchase apps
MBA’s Builder Application Survey (BAS) for November showed a 7.2% annual increase in mortgage applications for new home purchases, despite a seasonal 12% decline from October. The FHA accounted for 28% of these applications, emphasizing the demand among first-time homebuyers.
MBA estimated that new single-family home sales reached a seasonally adjusted annual rate of 713,000 units in November 2024, a 4.6% decrease from October’s pace of 747,000 units. On an unadjusted basis, 49,000 new homes were sold in November, down from 56,000 in October.
Kan noted that the 713,000 unit seasonally adjusted annual pace of new home sales was the third strongest month of 2024. He also pointed to affordability challenges in the resale market as a factor driving demand for new builds.
“Applications to purchase newly built homes have seen annual increases since February 2023, as prospective homebuyers continue to favor new homes, given affordability challenges and constrained existing inventory,” he said. “The decline in applications from the previous month was roughly in-line with typical seasonal patterns at the end of the year. The FHA share of applications, at 28%, continues to show that first-time homebuyers account for a significant share of new home demand.”
Conventional loans made up 61.6% of new home purchase applications, followed by FHA loans at 28%, VA loans at 9.9%, and RHS/USDA loans at 0.4%. The average loan size for new homes fell to $402,873 in November from $409,942 in October.
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