The housing industry boomed after shelter-in-place orders were lifted due to factors such as pent-up demand, but the drop in mortgage applications may point to a coming slowdown. CNBC reports that mortgage applications to purchase a home decreased for the second week in a row. Last week's 1% decrease may show that limited supply is affecting homebuyer options and their pent-up demand could be beginning to fade. Purchase volume was still 15% higher than last year, but even that comparison is shrinking. In addition, changes are occurring in refinance demand and average contract interest rates for 30-year fixed-rate mortgages.
“The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers’ options,” said Joel Kan, an MBA economist. “The average purchase application loan size increased to a record high in our survey — more proof that tight inventory conditions are leading to faster price growth.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $484,350 decreased to 3.29% from 3.30% last week. Points including the origination fee increased to 0.36 from 0.32 for loans with a 20% down payment. That is another record low.