High rates and affordability concerns push buyers to the sidelines
Mortgage application activity declined again last week, as persistent economic uncertainty and concerns over job stability continue to weigh on potential homebuyers.
Total mortgage applications dropped 4.2% on a seasonally adjusted basis for the week ending April 25, according to the Mortgage Bankers Association’s (MBA) Market Composite Index. On an unadjusted basis, applications were down 4% compared to the prior week.
Purchase activity saw a similar decline. The seasonally adjusted purchase index decreased by 4%, while the unadjusted purchase index slipped 3% week over week. However, compared to the same week a year ago, purchase applications were 3% higher.
“Mortgage rates were little changed last week with the 30-year fixed rate at 6.89%,” said MBA deputy chief economist Joel Kan. “Mortgage application activity, particularly for home purchases, continues to be subdued by broader economic uncertainty and signs of labor market weakness, dropping to the slowest pace since February.”
Kan noted that even with the spring homebuying season underway, demand remains soft.
“Purchase applications decreased, as conventional and VA applications saw declines of 6 percent and 4 percent, respectively,” he said. “With slowly-increasing housing inventory in many markets and first-time homebuyers still in the mix, FHA purchase applications fared better with only a slight decline.”
Despite the decline, overall purchase activity is still trending slightly ahead of last year’s pace.
Refinance applications also edged lower. The Refinance Index dropped 4% compared to the previous week but remained 42% higher than the same period one year ago. The refinance share of total mortgage activity held steady at 37.3%.
“Refinance activity dipped again, as mortgage rates remained close to 7%, and borrowers hold out for a bigger decline in rates,” Kan said. “Given the pullback in refinancing, the average loan size for refinances declined to just under $290,000, the lowest level in three months.”
The share of adjustable-rate mortgages (ARMs) also fell, now accounting for 7.4% of total applications, down from the week prior.
Borrower sentiment
Consumer sentiment around homeownership is showing signs of strain. According to TD Bank’s Consumer Index, while 90% of Americans still view homeownership as part of the American dream, about one-third express a negative outlook on their ability to buy a home in the current economic environment.
The top concerns cited include affordability (55%), cost of borrowing (32%), and economic uncertainty or job stability (29%).
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Despite the headwinds, 82% of respondents said they see their home equity as important to their overall financial stability, with 42% describing it as “very important.” Additionally, 68% view homeownership primarily as an investment to build equity.
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