Buyer demand may be high but tight inventory is keeping that demand from translating into sales. And with fewer choices of homes for sale, some buyers are retreating. Mortgage applications fell again last week, dropping 2.5 percent on a seasonally adjusted basis, the Mortgage Bankers Association reported Wednesday. Total volume is now 12 percent lower than the same week a year ago.
Home buyers were the ones who most receded from mortgage applications last week. Purchase applications dropped 5 percent for the week, and are now just 1 percent higher than a year ago, the MBA reports. Refinance applications—which tend to be more rate sensitive—increased 2 percent last week. Still, refinance applications remain 28 percent lower compared to a year ago, when interest rates were much lower.
But even with the tight market, the MBA reported a shift that may indicate increased activity from one particular group of buyers.
“The mix of business changed, with FHA purchase volume increasing as conventional and VA volume decreased,” noted Mike Fratantoni, chief economist at the MBA. “This indicates that more first-time buyers are entering the market, even as the market as a whole continues to be restricted by tight inventories of homes available for sale.” FHA loans offer down payments as low as 3.5 percent and are traditionally popular among first-time home buyers.
Mortgage rates were mostly flat last week. The 30-year fixed-rate mortgage averaged 4.77 percent, a slight increase over the previous week’s 4.76 percent average.
Source:
“Weekly Mortgage Applications Fall 2.5% as Buyers Struggle to Find Affordable Homes,” CNBC (July 18, 2018)
