In the week ending July 21, the Mortgage Bankers Association (MBA) reported a 1.8% weekly drop in overall mortgage applications, with mortgage rates still exceeding 6.70%.
After 22 years, the Federal Reserve finally raised the nominal interest rate by 25 basis points, following their recent meeting where no action was taken.
The MBA’s Refinance Index decreased by 0.4% from the prior week, marking a 30% drop from last year. The seasonally adjusted Purchase Index also declined by 3% compared to the previous week, with the unadjusted Purchase Index experiencing a 2% decrease from the prior week and a significant 23% decrease from the same week last year.
Joel Kan, the MBA’s VP and Deputy Chief Economist, stated that despite minimal changes in mortgage rates last week, they remained high, keeping the 30-year fixed rate at 6.87%. This stability led to a decrease in mortgage applications. Purchase activity fell by 2.5%, driven partly by a 10% drop in FHA applications, causing the Purchase Index to hit its lowest point in a month. Decreased FHA applications raised the average purchase loan size to $432,700, the highest since late May. Refinance applications stayed subdued, trailing last year’s levels by 30%, as many borrowers are hesitating due to current rates and ongoing affordability challenges.
Per Kan’s update, the FHA applications decreased to 12.7% from the prior week’s 13.6%, while VA applications remained at 12.1%. USDA applications held steady at 0.5%.
Refinancing activity increased to 28.7% from 28.4% the previous week, but the share of adjustable-rate mortgage (ARM) activity dropped to 5.9%.
Despite lower app volume, a recent report from NAHB indicated robust demand for new homes due to low existing inventory, boosting builder confidence in July. This increase defies rising mortgage rates, increased construction costs, and limited lots. The NAHB/Wells Fargo HMI reported a one-point rise to 56 in builder confidence for newly-built single-family homes in July, marking the seventh consecutive month of growth
According to NAHB Chairman Alicia Huey, limited resale home availability is driving more buyers toward new construction. She highlighted builder concerns about nearing 7% mortgage rates and persistent supply challenges, including a shortage of electrical transformer equipment and lot availability worries.
