A real estate agent with prospective buyers looking at the back yard from the kitchen during a showing.
Joe Amon | Denver Post | Getty Images
The refinance boom took a step back last week, bringing down total mortgage applications.
Mortgage application volume decreased 6.4% from the previous week, according to the Mortgage Bankers Association.
Refinance demand had been driving the volume of mortgage applications up, but refinance applications decreased 8% for the week, according to the MBA’s seasonally adjusted tally. The refinance index is still up year over year, with an increase of 165% from a year ago. Even with the weekly drop, it was the third highest reading this year.
Mortgage rates began falling more than a month ago as fears of the coronavirus hit financial markets. Mortgage rates loosely follow the yield of the 10-year Treasury. But, last week the 30-year fixed mortgage rate increased 5 basis points.
“Treasury yields moved slightly higher last week, despite uncertainty surrounding the economic impact from the spread of the coronavirus,” said MBA economist Joel Kan. “The 30-year fixed mortgage increased five basis points to 3.77% as a result, causing refinance applications — driven by an 11% drop in applications for conventional refinances — to fall.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased from 3.72%, with points remaining unchanged at 0.28 (including the origination fee) for 80% loan-to-value ratio loans.
Mortgage applications to purchase a home fell 3% last week but were 10% higher than a year ago. Low inventory of affordable homes continues to be a problem. “Too few options, especially at the lower portion of the market, are slowing some would-be buyers,” Kan said.
Builder confidence in the market for newly built single-family homes stayed strong in February, edging down only 1 point on the latest National Association of Home Builders/Wells Fargo Housing Market Index, which was also released Wednesday. But builders acknowledge they can’t keep up with the demand for affordable housing.
“At a time when demand is on the rise, regulatory constraints along with a shortage of construction workers and a dearth of lots are hindering the production of affordable housing in local communities across the nation,” said NAHB chief economist Robert Dietz. “And while lower mortgage rates have improved housing affordability in recent months, accelerating price growth due to limited inventory may offset some of that effect.”