This morning the Mortgage Banker’s Association released its weekly mortgage applications survey. The MBA found that total mortgage application activity fell sharply, dropping a seasonally adjusted 18.6 percent from the previous week. Refinance applications fell 24.6 percent from the previous week, hitting its lowest point since April. Purchase applications also decreased 2.5 percent from the week prior.
Michael Fratantoni, the MBA’s VP of Research and Economics commented:
“Refinance application volume dropped sharply this week as mortgage rates held near six month highs. Purchase applications fell for a second week, with the level of applications little changed over the past month, indicating that home sales are likely to remain relatively weak over the next few months.”
It is hard to say how much of this can be attributed to the increase in mortgage rates, and how much of the decline is attributable to seasonal factors. I would hazard a guess that the declines we are seeing would not be anywhere near as drastic had rates maintained their November levels. According to Freddie Mac, the average rate on a 30 year fixed mortgage has increased from 4.17 percent in early November to 4.83 percent last week. The rates on other mortgage products have also followed suit.
This lack of activity has to be very concerning to anyone in the mortgage or real estate business. As of October the MBA predicted that mortgage volume would fall from $1.4 trillion in 2010 to less than $1 trillion in 2011. This was before the spike in rates that occurred over the last month. These numbers speak to the overall poor state of the economy as well as the housing market. Although economic sentiment seems to be improving lately, 2011 still looks to be a rough year for the housing market.
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