After last week’s 0.2% increase, the MBA mortgage applications index fell -6.3% to a three-month low in the week of Oct 15. The measure is now back at the 18-month low it reached in July. This drop was mainly due to a -7.1% drop in the refi index, which dropped to a new 3 month low. This extends last week’s drop of -0.5%. After last week’s 1.5% increase, we saw a drop of -4.9% in the purchase index. We are now back at the 5-month high and above the July 14-month low. Both measures fell due to a sharp 4-week increase in mortgage rates to 6-month peak levels.
- The MBA mortgage applications index dropped -6.3% to a three-month low in the week ending October 15, after a 0.2% increase, compared to an 18-month low at July’s beginning.
- The MBA refi index dropped -7.1% to a three-month low following a -0.5% fall. This compares to a 5-month high at August’s start and a 17 month low at July’s start.
- The MBA purchase indicator fell to a one-month low after a 1.5% increase. This compares with a mid-September 5-month high and July’s 14-month low.
The headline applications index saw a 12.0% decrease in its 12-month contraction rate from -14.1% to -19.0%. The refi index declined to -22.4% y/y from a prior 16.3%. While the purchase component grew to a 12.4% y/y rate from a previous -9.9%.
To make it a steep 4-week climb up to a 6-month peak, the 30-year mortgage rate climbed to 3.23%. After a 5-week period at 3.03%, we saw rates of 3.18% and 3.14% last week. The rate was 3.02% one year ago. The current reading is the highest recorded since June’s 3.20%. After a peak in 2021 of 3.36% in March and April and a low of 2.85% in December 2020, we saw rates drop to sub-3% in August.
After last week’s rise of 3.08% to 2.54%, the 5-year ARM rose by 3.09% to 3.09%. It was at 2.86% in the same year.
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After a 9.1% rise in September, the purchase index fell -1.7% in October. This was the first increase since March. There were declines of 0.8% in August, 2.4% in July, 2.0% in June, and -5.1% (May) and 4.5% (April). The purchase index reached a 15-month low in July and a 12-year high in mid-January.
Today’s rate-related declines are not reflected in the headline. This is consistent with our assumption that SA data will behave contra-seasonally in 2021. In 2020, SA data will be less affected by capacity constraints than in the spring peak housing season. After the Q2 pullback from the high levels of last winter, we saw a similar jump in existing and new home sales in Q3. However, housing starts were severely affected by hurricane IDA in September which depressed the Q3 average.
In 2021, the MBA headline and purchase indicators have been underperforming overall due to headwinds such as rising prices for building materials and shortages of labor and land and an increase in mortgage rates. Despite huge price increases and a historic shortage of housing inventory, we saw remarkable restraint in all housing sector data during spring housing season.