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Housing Market Inventories Push Down MBA Mortgage Applications

The MBA mortgage applications index fell -4.0% in the week of May 28, after a -4.2% drop last week, but gains of 1.2% and 2.1% in the two prior weeks, leaving declines in all by seven weeks of 2021. The drop reflected a -4.6% decline in the refi index to a 15-month low, after a -7.2% drop last week that reversed three prior weekly gains, and a disturbing -3.1% drop in the purchase index to a new 12-month low, after a 1.7% bounce last week that only partly trimmed the prior week’s decline.

Low inventories, rising costs, and declining affordability are all headwinds to sales transactions and hence new mortgage lending, and it looks like we’ve played out the lift for the refi index from the stabilization in mortgage rates since March. We also expect a big -10% May vehicle sales drop to be reported at the end of the day.

  • The MBA mortgage applications index fell -4.0% in the week ended May 28, after a -4.2% drop.
  • The MBA purchase component fell -3.1% to a new 1-year low, after a 1.7% gain.
  • We expect today’s vehicle sales data to reveal a -10% May drop to a 16.7 mln pace from a 16-year high of 18.5 mln.

The y/y growth rates are all bouncing, due to base effects from last year’s pandemic. The applications index posted a 3.0% y/y gain, versus -6.8% y/y in the prior week. The refi index posted a 6.0% y/y clip, compared to -8.6% y/y, while the purchase index sat a -1.6% y/y, compared to -3.8% y/y.

The relatively flat path for mortgage rates since March, alongside the housing boom, supported the MBA index into early May via a stabilization in refis, but this benefit is now dissipating. More importantly, the purchase index is following a surprisingly weak patch and has now dropped below the 9-month low in mid-February.

The 30-year mortgage rate inched up to 3.17% from 3.18% in the prior week, versus readings in the last two weeks of 3.15% and the same 3.11%. We saw a 3.36% 2021 peak from mid-March and early April as the Treasury yield topped out at 1.74% on March 31. We saw an all-time low of 2.85% on December 11. The 5-year ARM fell to 2.54% from 2.81% in the prior week, versus readings in the last two weeks of 2.58% and 2.57%.

We saw a -5.1% drop for the purchase index in May, after a -4.5% April drop, a 3.6% March gain, and a -15.4% February plunge. The purchase index is entering June -2.6% below its May average. The purchase index is at a 12-month low at the end of May, versus a 9-month low in mid-February and a 12-year high in mid-January.


The 2021 rise in mortgage rates has substantially depressed refi activity, while higher rates and soaring home prices are also impacting the purchase index. The declines seemed to reach a peak in February with a quick mortgage rate rise, bad weather, and the Texas freeze, but the downtrend has resumed with continued headwinds from remarkably high prices for building materials, and shortages of labor and land. We’re seeing restraint in all the housing sector data since April, despite outsized price gains and a historic shortage of home inventory. Inflation will likely still cause prices to rise until we see action by the Fed or increase in the 10YR.

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