Mortgage News - Mortgage Demand Remains Driven By Purchase Applications

Mortgage Demand Remains Driven By Purchase Applications

Mortgage News July 5, 2023

According to the Mortgage Bankers Association, there was a notable rise in purchase applications, leading to increased demand for mortgages during the week ending June 23.

The MBA’s weekly survey indicated a 3% increase in mortgage loan application volume when adjusted for seasonal factors. However, on an unadjusted basis, applications decreased by 8% compared to the previous week.

Joel Kan, the deputy chief economist at the MBA, pointed out that mortgage rates fluctuated across different loan types during the previous week, resulting in a slight increase to 6.75% for the 30-year fixed rate.

Kan noted that the difference between jumbo and conforming rates grew to 16 basis points for the third consecutive week. He highlighted that historically, from May 2022 to May 2023, the jumbo rate was typically 30 basis points lower than the conforming rate.

The MBA’s survey data indicated a 3% increase in both refinance and purchase loan applications compared to the previous week.

Kan stated that purchase applications showed a continuous growth trend for the third week in a row, reaching the highest level since early May. However, despite this increase, they were still over 20% lower compared to the same period last year. He mentioned that the demand for new homes has been the primary driver of purchase activity in recent months, as buyers seek alternatives to the existing-home market. The limited availability of homes for sale has constrained existing-home sales, as many potential sellers choose to hold onto their mortgages with lower interest rates.

Doug Duncan, the chief economist at Fannie Mae, remarked that the “lock-in effect,” where current homeowners are discouraged from selling their homes to avoid losing their lower mortgage rates, is still causing a shortage of listings in the market. As a result, prospective homebuyers are increasingly shifting their focus towards new homes. This trend aligns with the recent strengthening of home price growth and the positive outlook among homebuilders in recent months.

The Census Bureau reported a notable surge in new single-family home sales, with a 12.2% increase in May. The seasonally adjusted annualized rate reached 763,000, marking the highest level since February 2022.

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Mortgage Demand Remains Driven By Purchase Applications

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