Buyers Pull Back on Mortgage Applications for Second Week

Despite lower mortgage rates, applications for a mortgage to purchase a home were lower than one year ago for the second consecutive week. High home prices and low supply may be taking a toll on homebuyers as mortgage applications dropped 3% for the week and were 2% lower than one year ago. Mortgage application volume fell 4% last week from the previous week as well, according to CNBC. And the indicator of future closed sales, pending home sales, dropped 4.4% in April, a much more dramatic decrease than anticipated. 

Buyers are clearly starting to hit an affordability wall. This is especially clear from the government loan demand. FHA and VA loans offer low or even no down payment options for borrowers with lower incomes and credit scores.

“Tight housing inventory, obstacles to a faster rate of new construction, and rapidly rising home prices continues to hold back purchase activity,” said Joel Kan, an MBA economist. “The government purchase index declined to its lowest level in over a year and has now decreased year over year for five straight weeks.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.17% from 3.18%, with points increasing to 0.39 from 0.35 (including the origination fee) for 80 percent loan-to-value ratio loans. That rate was 20 basis points higher one year ago.

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