U.S. Mortgage Applications Slide by 7%: Is the Housing Market Headed for Trouble?

U.S. Mortgage Applications Slide by 7%: Is the Housing Market Headed for Trouble? Find out the latest statistics from the Mortgage Bankers Association's Weekly Mortgage Applications Survey, indicating a decrease in mortgage applications and a potential downturn in the housing market.

According to the Mortgage Bankers Association's latest Weekly Mortgage Applications Survey, the U.S. experienced a decrease of 6.9 percent in mortgage applications in the week ending October 13, 2023. The Market Composite Index, which measures mortgage loan application volume, also decreased by 6.9 percent on a seasonally adjusted basis compared to the previous week. On an unadjusted basis, the Index witnessed a 7 percent decrease from the previous week. The Refinance Index experienced a 10 percent decrease from the previous week and was 12 percent lower than the same week one year ago. Additionally, the seasonally adjusted Purchase Index decreased by 6 percent from the previous week, while the unadjusted Purchase Index decreased by 5 percent compared to the previous week and was 21 percent lower than the same period last year.

U.S. Mortgage Applications Slide by 7%: Is the Housing Market Headed for Trouble? | ogusyis

Analyzing the different segments of mortgage activity, the refinance share decreased to 30.5 percent of total applications from 31.6 percent in the previous week. The adjustable-rate mortgage (ARM) share of activity, on the other hand, increased to 9.3 percent of total applications. In terms of government-insured loans, the FHA share of total applications increased to 14.8 percent from 14.4 percent in the previous week, whereas the VA share of total applications rose to 10.7 percent from 10.2 percent. Notably, the USDA share of total applications remained unchanged at 0.5 percent.

Shifting our focus to interest rates, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) saw a slight increase to 7.70 percent from 7.67 percent. However, the points decreased to 0.71 from 0.75 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. This led to an increase in the effective rate compared to the previous week.

Regarding jumbo loan balances (greater than $726,200), the average contract interest rate for 30-year fixed-rate mortgages decreased to 7.56 percent from 7.70 percent. Meanwhile, the points increased to 0.85 from 0.57 (including the origination fee) for 80 percent LTV loans. Consequently, the effective rate decreased from the previous week.

For 30-year fixed-rate mortgages backed by the FHA, the average contract interest rate decreased to 7.36 percent from 7.40 percent, while the points decreased to 1.02 from 1.08 (including the origination fee) for 80 percent LTV loans. This resulted in a decrease in the effective rate as well.

In the case of 15-year fixed-rate mortgages, the average contract interest rate increased slightly to 6.98 percent from 6.97 percent. However, the points decreased to 1.04 from 1.18 (including the origination fee) for 80 percent LTV loans. Consequently, the effective rate decreased compared to the previous week.

Lastly, the average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) increased to 6.52 percent from 6.33 percent. Additionally, the points increased to 1.50 from 0.90 (including the origination fee) for 80 percent LTV loans. As a result, the effective rate increased from the previous week.

In conclusion, the latest data from the Mortgage Bankers Association's Weekly Mortgage Applications Survey indicates a decline in U.S. mortgage applications. Various factors, including interest rates, refinance rates, and loan types, have contributed to this downward trend. As the industry continues to evolve, potential buyers and homeowners need to consider these market conditions when making decisions regarding their mortgage applications.