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“Spring has arrived, but the housing market is missing the customary burst in listings and purchase activity that typically mark the season,” he said. “After four weeks of increasing purchase application activity, volume declined a bit this week even with another small drop in mortgage rates. Additionally, refinance application volume continues to be quite low. Although the mortgage rate for conforming balance loans declined by five basis points over the week to 6.40%, the mortgage rate for jumbo loans increased by nine basis points to 6.36%. While we have seen relative weakness at the high end of the housing market in recent months, the divergence in rates suggests that banks may be tightening credit in response to recent challenges, preserving balance sheet capacity as deposit balances have declined. In recent years, most jumbo loans have been kept on depository balance sheets.”
It’s not all doom and gloom, however. Fratantoni predicts that there will be strong demand from first-time homebuyers in the coming years, thanks to a large number of millennials hitting peak first-time homebuyer age. The challenge remains affordability, particularly for those looking to enter the housing market at the entry-level segment.
“At the entry-level segment of the market, purchase applications for both FHA and VA loans decreased last week,” he said. “We do expect strong demand from first-time homebuyers over the next several years given a large number of millennials hitting peak first-time homebuyer age, but affordability remains a real challenge in this environment.”
The MBA also reported a dip in refinance and adjustable-rate mortgage (ARM) activity, with the refinance share decreasing to 28.6% of total applications and the ARM share dropping to 7.2%.
Meanwhile, the FHA and VA share of total applications also decreased, but the USDA share increased slightly.
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