Mortgage demand sinks even as rates drop

• Mortgage rates dropped for the second week in a row.
• Overall mortgage demand fell by 5.4 percent from the previous week.
• Mortgage refinancing applications fell 8% for the week and 78% from the same week last year.

The second consecutive week of lower mortgage rates failed to rekindle homeowner or potential buyer desire.

According to information from the Mortgage Bankers Association, rates decreased by 10 basis points last week and by 24 basis points over the previous two weeks, although overall mortgage demand fell by 5.4 percent from the previous week. Results for this week have been adjusted for the holiday to reflect early closings on the Friday before Independence Day.

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For loans with a 20% down payment, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased from 5.84 to 5.74 percent, with points increasing from 0.64 to 0.65, including the origination fee.

Mortgage rates dropped for the second week in a row, Joel Kan, MBA’s assistant vice president of economic and industry forecasts, said. “Growing fears over an economic slowdown and increasing recessionary risks kept Treasury yields lower.

These worries were reflected in house loan refinancing applications, which fell 8% for the week and 78% from the same week last year. From 30.3 percent the previous week, the refinance portion of mortgage activity fell to 29.6 percent of all applications.

For the week and the year, home purchase applications decreased as well, by 4% and 17%, respectively.

Applications for house purchases and refinances are still at historically low levels because rates are still much higher than they were a year ago. Low inventory and continued affordability issues are hampering purchase activity, according to Kan.

Last week, Realtor.com released its June housing report, which revealed that the for-sale inventory was rebounding and increasing at its fastest annual pace ever, up 18.7 percent year over year. In contrast to June 2019, there are still 53.2% fewer houses available.

“Our June data reveals an acceleration in the inventory recovery, with the second consecutive month of active listings growth in over three years. Danielle Hale, senior economist at Realtor.com, stated that “We expect these gains to continue, but the typical buyer has yet to experience real relief from swiftly selling properties and record-high asking prices.”

The average house purchase loan size is $405,200, down from $413,500 for the week ended June 24. This is according to the Mortgage Bankers Association.