Even with mortgage interest rates sitting near record lows, mortgage applications failed to make any gains last week.
Total application volume decreased 4 percent on a seasonally adjusted basis for the week from the previous week, according to the Mortgage Bankers Association.
Even refinances, which are highly rate-sensitive, were unimpressed by the continued low rates, falling 4 percent from the previous week, seasonally adjusted. They are, however, nearly 48 percent higher compared to the same week one year ago, when interest rates were higher.
“Refinance volume continues to tail off as markets recover post Brexit,” said Michael Fratantoni, chief economist for the MBA.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.64 percent from 3.65 percent, with points decreasing to 0.31 from 0.34 (including the origination fee) for 80 percent loan-to-value ratio loans.
Mortgage applications to purchase a home also lost ground, falling 4 percent for the week to the lowest level since February. Still, they are 10 percent higher than the same week last year.
“A strong job market and low rates continue to support home sales,” Fratantoni said.
Low rates are the only bright spot in a housing market plagued by low inventory and rising prices. Several major U.S. metropolitan markets are hitting new record high median home prices, and homebuilders are not starting enough new homes to meet demand and help moderate the price gains. Single family housing starts in July rose less than 1 percent for the month, and building permits, an indicator of future construction, fell 3.7 percent, according to the U.S. Census.
“Single family starts of 770,000 is about exactly where the year to date average is, 25 percent below the 25 year average and 58 percent below the 2006 peak,” said Peter Boockvar, chief market analyst of the Lindsey Group. “Yes, we continue to be in a housing recovery but let’s put it into perspective.”
Mortgage rates did begin inching higher Tuesday and could make bigger gains depending on what investors glean from the release of the Federal Reserve minutes Wednesday.
“This gives investors a chance to examine the Fed’s discussion leading up to the late July policy announcement in greater detail,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “At the moment, everyone is looking for clues about the Fed’s thoughts on hiking rates at the September or December meeting. If the minutes make it seem like September is more likely, rates could easily continue higher.”