Purchase mortgage application volume continued its upswing as consumers acted on record low rates, but high unemployment and low inventory could hold home buying activity back in the future, the Mortgage Bankers Association said.
The MBA's Weekly Mortgage Applications Survey for the week ending May 29 found there was a 3.9% seasonally adjusted decline in activity led by a 9% drop in the refinance index
"Purchase applications continued their recent ascent, increasing 5% [seasonally adjusted] last week and 18% [unadjusted] compared to a year ago. The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "However, there are still many households affected by the widespread job loss and current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months."
On an unadjusted basis there was a 7% week-to-week decline in the purchase index and a 14% drop in total volume.
"In contrast to the upswing in purchase activity, refinance applications fell for the seventh consecutive week — even as the 30-year fixed rate hit another MBA survey-low of 3.37%. After reaching a peak of 76% earlier this year, refinances now account for less than 60% of activity, and the index is now at its lowest level since Feb. 21," Kan said.
The refinance share of mortgage activity decreased to 59.5% of total applications from 62.6% the previous week.
Adjustable-rate mortgage activity increased to 3.5% from 3.4% of total applications, while the share of Federal Housing Administration-insured loan applications remained unchanged from 11.2%.
The share of applications for Veterans Affairs-guaranteed loans decreased to 12% from 12.4% and the U.S. Department of Agriculture/Rural Development share increased to 0.7% from 0.6% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased 5 basis points to 3.37%, a new low since the MBA started tracking this data. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate decreased 5 basis points to 3.66%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased 5 basis points to 3.46%. For 15-year fixed-rate mortgages, the average decreased 2 basis points to 2.85%. The average contract interest rate for 5/1 ARMs decreased 3 basis points to 3.05%.
