The Mortgage Bankers Association (MBA) is a trade association representing the real estate finance industry. Headquartered in Washington, DC, MBA’s membership base includes all sectors of the real estate finance industry including originators, servicers, underwriters, compliance personnel and information technology professionals representing mortgage companies in the residential, commercial and multi-family arenas. The MBA maintains an extensive data reporting operation that produces a number of national statistics including the Weekly Survey of Mortgage Activity, that is based on a survey coveruing over 75 percent of all U.S. retail residential mortgage applications, that has been conducted weekly since 1990.
According to the MBA, mortgage applications decreased 3.7 percent in the last week of July from one week earlier, in addition, the Refinance Index decreased 4 percent from the previous week, and the seasonally adjusted Purchase Index decreased 3 percent from one week earlier. All of this suggested a decline in the housing market for the week.
The MBA’s Purchase Index also decreased 3 percent compared with the previous week but was 5 percent higher than the same week one year ago. Overall refinancing is down sharply (55 percent since its most recent peak), reflecting generally rising mortgage interest rates. Overall, even though applications for home purchases dropped for the fourth time in five weeks, purchase volume is running about 5 percent higher than last year at this time.
The average interest rate for 30-year fixed-rate mortgages with loan balances of $417,500 or less was unchanged at 4.58 percent, while the average contract interest rate for 30-year fixed-rate mortgages with loan balances greater than $417,500 decreased to 4.64 percent from 4.66 percent.
While these weekly figures can be quite volatile, they do suggest that the artificially low interest rate environment that has been maintained by the fed has helped to spur the mortgage market – particularly the market for mortgage refinancing activity. While much improved since the recession, the actual housing market and particularly the market for new homes continues to be relatively weak, reflecting the fact that there is still significant inventory available in the growth markets in the southern part of the country. Overall, housing markets tend to grow along with the growth in new households plus the real growth in the economy. Since the economy has been stagnant, and since many younger families are not creating new households, it is likely that the market for new homes will continue to struggle. Interest rates are still low, but many homeowners have already advantaged themselves of very low mortgage rates, so the potential for refinancing is also starting to wane.
This suggests that while the Federal Reserve’s policies of forcing down long term interest rates is working to boost the housing market, it is likely that market interest rates will continue to rise and that further growth in the housing market will continue to be limited by the poor state of the economy.