U.S. Home Loan Purchase Applications Crashed To A 9-Month Low

U.S. home loan purchase applications fell for the third straight week, reaching a 9-month low. Mortgage Bankers Association (MBA) data showed that the purchase index decreased by 11.6 percent (largest drop since April 2020) in week ended February 19, 2021 (v -6.1 percent in the week prior). The index of purchase applications has fallen in four of the last five weeks and is down 23.9 percent from mid-January.

The sharp decline observed over the past weeks suggests that the housing boom could slow a bit in a context where mortage rates have rebounded. As a matter of fact, we saw yesterday that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) jumped to 3.08 percent (highest since September 2020), up from 2.98 percent the prior week.

Meanwhile, the significant increase of housing prices could have weighed on demand. Earlier this week, I reported that the S&P CoreLogic Case-Shiller index (20-City Composite) increased more than expected, rising 10.10 percent YoY in December (largest spike since April 2014). In the meantime, the FHFA (Federal Housing Finance Agency) purchase-only price index rose 11.4 percent YoY in December (the largest increase on record and up from 11.0 YoY percent in November). More recently, the National Association of Realtors highlighted the median selling price of a previously owned home rose to $303,900 in January, a record for the month.