Mortgage Applications Decline Amid Lack of Available Properties

July 18, 2018 — 12:06 PM EDT

A dearth of affordable properties and rising home values kept would-be homebuyers on the sidelines for the week ending July 13, with the Mortgage Bankers Association (MBA) reporting that mortgage applications dipped 2.5% compared with the week earlier.

According to data from the trade association, for the week ending July 13, applications for new home loans declined 2.5% on a seasonally adjusted basis. On an unadjusted basis, the Market Composite Index, which measures mortgage loan application volume, increased 22% compared with the week earlier. Meanwhile, the Refinance Index increased 2% from the week earlier, while the adjusted Purchase Index dipped 5% from the week earlier. The unadjusted Purchase Index increased 19%. The refinance share of mortgage activity was able to increase, accounting for 36.5% of total applications, up from 34.8% in the week earlier. The share of adjustable-rate mortgages decreased to 6.1% of all loan applications.

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In an interview with CNBC, MBA chief economist Mike Fratantoni said that the mix of loan applications has changed, with FHA purchase volume increasing as conventional and VA loan applications decline. "This indicates that more first-time buyers are entering the market, even as the market as a whole continues to be restricted by tight inventories of homes available for sale," he said. The FHA share of loan applications increased to 10.6% for the week ended July 13 compared with 10% in the prior week. Meanwhile, VA loan applications fell to 10.2% from 11.2% in the previous week.

For all of June, mortgage rates were flat to lower, and even with them ticking up again in July, that isn't the reason why home loan applications are down. With property values continuing to rise and bidding wars breaking out in some parts of the country, some homebuyers are having a hard time closing on a deal. That is weighing on applications more so than rates, which were mixed for the week ending July 13. According to the Mortgage Bankers Association, the average rate on a fixed 30-year mortgage with a loan balance of $453,100 or less was at 4.77% as of July 13, up from 4.76% in the week earlier. For jumbo loans, or those valued at more than $453,100, the MBA said that the interest rate declined to 4.66% from 4.68% a week earlier.