The U.S. Mortgage market experienced a notable slowdown in the week ending , as winter storms across the country disrupted homebuying activity. Total mortgage application volume decreased by 8.9%, according to data released by the Mortgage Bankers Association (MBA).
The decline reflects a broader cooling trend in the housing market, exacerbated by inclement weather. The MBA noted that the results for the week included an adjustment for the Martin Luther King Jr. Holiday, suggesting the drop wasn’t solely attributable to the holiday’s impact on processing times.
Mortgage Rates See Modest Decline
Despite the decrease in application volume, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (up to $832,750) edged down slightly to 6.21% from 6.24% the previous week. Points increased to 0.56 from 0.55, including the origination fee, for loans with a 20% down payment. This modest rate decrease, however, wasn’t enough to significantly stimulate demand.
Refinance Activity Remains Elevated
While purchase applications suffered a more substantial decline, refinance activity remained relatively strong. Applications to refinance a home loan fell by 5% for the week, but were still 117% higher than the same week in , when rates were above 7%. The refinance share of mortgage activity increased to 57.1% of total applications, up from 56.2% the previous week. This suggests homeowners continue to seek opportunities to lower their monthly payments by refinancing, despite the recent dip in application volume.
Purchase Applications Plummet
The most significant drop was observed in applications for a mortgage to purchase a home, which fell by 14% for the week. Purchase applications were only 4% higher year over year, marking the weakest annual increase since .
Joel Kan, vice president and deputy chief economist at the MBA, attributed the decline in part to Winter Storm Fern. “Winter Storm Fern likely had an impact as much of the country was snowed in, hampering homebuying activity,” he said. The storm’s impact underscores the sensitivity of the housing market to weather conditions, particularly during the winter months.
Broader Market Context and Rate Fluctuations
While the MBA data reflects conditions through , mortgage rates have experienced further movement in the days since. Separate data from Mortgage News Daily indicates that rates have risen to their highest level in two weeks, driven by a stronger-than-expected report on the manufacturing sector. However, the range of rate fluctuations remains narrow.
Impact on Opendoor and the iBuying Sector
The slowdown in mortgage demand is also impacting companies in the broader real estate technology sector. Opendoor stock dropped 5% following the release of the mortgage demand data, as investors reacted to the potential implications for the company’s business model. The company’s February 19 earnings results are now under increased scrutiny, as analysts assess the impact of the cooling housing market on its performance.
Looking Ahead
The recent decline in mortgage applications highlights the challenges facing the housing market as it enters the spring season. While lower mortgage rates could provide some support, factors such as inclement weather and broader economic conditions will continue to play a significant role. The market will be closely watching for further data on home sales and mortgage rates in the coming weeks to assess the extent of the slowdown and its potential impact on the overall economy.
The combination of weather-related disruptions and modest rate movements suggests a cautious outlook for the near term. Potential homebuyers appear to be delaying purchases, while existing homeowners are still exploring refinance options. The trajectory of the housing market will depend on a complex interplay of economic factors and seasonal trends.
