A real estate agent stands in the doorway as Giovani and Nicole Quiroz of Brooklyn, New York attend an open house in West Hempstead, New York on April 18, 2021.
Raychel Brightman | Newsday LLC | Newsday | Getty Images
Sky-high property prices mean the demand for bigger and bigger mortgages, but those prices can also lead to an overall decline in home purchases.
Mortgage applications for home purchases decreased by 4% in the past week compared to the previous week, according to the seasonally adjusted index of the Mortgage Bankers Association. The volume was only 2% higher than the same week a year ago when the housing market just returned after the pandemic closed it.
“There has been a decline in purchase requests for both conventional and government loans,” said Joel Kan, MBA economist. “There is still strong demand to buy a home, but persistent supply shortages are limiting buying activity, and building material shortages and higher costs make it difficult to increase supply.”
Because of the extreme scarcity, prices continue to rise at the fastest pace in over 15 years, and as a result, average purchase credit balances are rising at the same time. Last week, that average was $ 411,400 – the highest since February.
Buyers who can stay in the market also saw higher mortgage rates last week. The average contract rate for 30-year fixed rate mortgages with compliant loan balances ($ 548,250 or less) increased from 3.11% to 3.15%, with credit points decreasing 20% from 0.32 (including the origination fee) payment rose to 0.36%.
The interest rate, while a little higher, was still lower than it was in March, and this gave a chance to borrowers looking to save monthly payments. Home loan refinancing requests rose 4% from the previous week but were 2% lower than the same week a year ago. The refinancing share of mortgage activity rose from 61.3% in the previous week to 63.3% of the total applications.
“Continued volatility in refinancing requests is likely if interest rates continue to fluctuate around current levels,” Kan said.
Mortgage rates have been on a hold pattern this week and there have been no significant economic reports or news to move them one way or the other.