The spring housing market, usually bustling with activity, is currently experiencing a lackluster period with mortgage demand at a standstill. The Mortgage Bankers Association reported that application volume remained essentially flat last week, dropping by 0.7% compared to the previous week. This trend is concerning as it indicates a lack of consumer interest in obtaining new mortgages or refinancing existing ones.
Applications to refinance a home loan saw a significant decline of 2% for the week, marking a 9% drop compared to the same week last year. One of the primary reasons for this decline is the fact that mortgage rates today are approximately half a percentage point higher than they were at this time last year. As a result, recent borrowers have little to no incentive to refinance, while those with older mortgages are already locked into lower rates.
Lackluster Purchase Applications
The situation isn’t much different for those looking to purchase a home, as applications for a mortgage to buy a new home decreased by 0.2% from the previous week and were down by a significant 16% year over year. Homebuyers are holding out for lower mortgage rates and increased availability of listings on the market before making a move. This cautious approach is understandable given the current economic climate.
MBA economist Joel Kan noted that lower rates could potentially stimulate more activity in the housing market, as they would help free up additional inventory by reducing the lock-in effect. However, the forecast for rates to move towards 6% by the end of the year suggests that any significant changes will likely occur gradually. The current sideways movement in mortgage rates is expected to persist until new economic data is released next week, potentially bringing some clarity to the market’s direction.
The mortgage market is facing a challenging period with stagnant demand, declining refinance applications, and lackluster purchase activity. The forecast for rising rates and the cautious approach adopted by consumers indicate a period of uncertainty ahead. It remains to be seen how the market will react to changing economic conditions in the coming weeks.