(TheLibertyRevolution.com)- Despite continued low interest rates, overall demand for new mortgages and refinanced mortgages have dropped in recent weeks.
Last week, total mortgage application decreased 2.5% from the week before. Those stats come courtesy of the seasonally adjusted index that’s published by the Mortgage Bankers Association.
That decline in mortgage demand comes despite the average contract interest rate on the most popular mortgage — a 30-year fixed-rate mortgage — decreasing from 3.20% to 3.17%. Points on the mortgage, which includes the origination fee, also dropped from 0.36 to 0.30 for loans that included a 20% down payment.
That’s the lowest rate on that type of mortgage in the last two months.
Refinances are more sensitive to weekly moves in the interest rate, but applications for those still decreased 1% last week. What’s more, applications for refinance mortgages were 18% lower last week than they were last year at this time.
One major reason for this, though, is that mortgage rates were at record lows last year, at rates that are considerably lower than they are now. As Joel Kan, the vice president of economic and industry forecasting for the Mortgage Bankers Association, said:
“Even with a few weeks of lower rates, most borrowers have likely already refinanced, which is why activity has decreased in seven of the last eight weeks.”
That statement is very poignant. There are only so many mortgages that can be refinanced, and once they’re refinanced, it’s likely that segment of the market will begin to dry up — as we see now.
Week-over-week, overall mortgage applications dropped 5%. Optimists will say that the applications are 34% higher now than they were last year at this time.
The problem with that analysis, though, is that the economy overall grounded to a halt in the spring of 2020 due to the onset of the coronavirus pandemic. People weren’t doing much of anything economically, as many lost jobs and states around the country still had lockdown orders in place.
Another major barrier to new mortgage applications is the fact that the housing market has soared to new heights in the last year or so. There are a record-low supply of houses for sale on the market, which has driven prices through the roof.
Average home prices in February, for example, increased 12% year-over-year, making it the largest gain in the last 15 years. So, even with mortgage interest rates still being extremely low, home prices are so high with so few homes on the market that it’s tough for people to afford what they want, or need.
And when people do find a home they love, and can afford, they find that if they don’t act fast enough, it’ll be gone.
This is seen in the data as well. Over the last four or five weeks, purchase applications for homes have decreased.
Danielle Hale, the chief economist for realtor.com, said:
“While buyers were eager in early 2021, sellers have been holding back. We’ve seen 200,000 fewer new sellers than we would typically see in January and February, and an additional 117,000 new sellers were missing compared to the typical year in March. These trends have resulted in extraordinarily frustrating trends for buyers, especially first-timers.”