Is the Mortgage Market Still Finding a True Bottom?

Despite the recent uptick up in home sales, the mortgage market is still having difficulty finding long-term momentum. According to the Mortgage Bankers Association’s latest update, for the week ended  June 20, applications for home loans declined 1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index dropped 2 percent. Mortgage loan application volume is now at its lowest level since April.

The Refinance Index, which posted a 13 percent decline in the previous week, slipped another 1 percent to reach its worst level since May. The seasonally adjusted Purchase Index also decreased 1 percent. The unadjusted Purchase Index fell 2 percent and was still 18 percent below the same week a year earlier. As the chart above shows, applications have struggled to gain momentum for a sustained period since the housing bubble collapsed.

Overall, the refinance share of mortgage activity accounted for 52 percent of total applications, unchanged from a week earlier. It has been a rare occurrence to see the refinance share of mortgage activity gain ground. Refinancing has dropped for 13 of the past 20 weeks.

Lower interest rates were unable to boost the mortgage market last week. The average rate for a 30-year fixed-rate mortgage fell to 4.28 percent from 4.32 percent, while the average rate for a 15-year fixed-rate mortgage decreased to 3.47 percent from 3.5 percent.

On the bright side, there have been positive signs in other areas of the housing market. Earlier this week, the National Association of Realtors reported that existing-home sales in May rose almost 5 percent from April, the highest monthly gain since August 2011. In a separate report, the U.S. Census Bureau revealed that sales of new single-family houses in May surged 18.6 percent month-over-month. It was the fastest pace for new home sales in six years.

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