The Mortgage Bankers Association (MBA) reports that mortgage loan applications have seen minimal movement, with the Market Composite Index stabilizing around 200 since October 2022. High mortgage rates and limited resale inventory continue to challenge potential buyers.
In the latest weekly survey, mortgage activities showed a decline across the board. On a seasonally adjusted basis, total mortgage applications dropped by 5.2%, purchasing activities fell by 4.4%, and refinancing activities decreased by 6.8%. Comparing year-over-year data, the overall market index for May 2024 is down by 8.4%, highlighting ongoing housing affordability issues. The Purchase Index has decreased by 14.5%, while the Refinance Index has seen a slight increase of 5.3% compared to May 2023.
High mortgage rates remain a significant factor in the reduced mortgage activity. For the week ending May 31, the 30-year fixed mortgage (FRM) rate stood at 707 basis points (bps), which is 16 bps higher than the same period last year.
Despite these higher rates, the average loan sizes for purchasing and refinancing have remained stable at approximately $438,000 and $258,000 respectively, similar to last year's figures.
This stability indicates that fewer buyers are entering the market, largely due to being priced out. However, those who are purchasing homes tend to buy at higher prices. In contrast, the average loan size for adjustable-rate mortgages (ARM) has increased significantly by 20.7%, from $831,600 to $1 million, reflecting a shift among buyers towards larger loan amounts.
The ongoing challenges in the housing market, driven by high rates and limited inventory, continue to shape the landscape for both buyers and lenders.