Year Kicks Off With Slight Rise in Refi Apps

For the start of 2023, Mortgage Bankers Association (MBA) reported that overall mortgage application volume rose 1.2% week-over-week for the week ending January 6, 2023.

The MBA’s Refinance Index increased 5% from the previous week, and was 86% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 1% from one week earlier. The unadjusted Purchase Index increased 47% compared with the previous week, and was 44% lower than the same week one year ago.

“Mortgage rates declined last week as markets reacted to data showing a weakening economy and slowing wage growth. All loan types in the survey saw a decline in rates, with the 30-year fixed rate falling to 6.42%. Purchase applications continued to be hampered by broader weakness in the housing market, and declined slightly over the week, with the index slipping to its lowest level since 2014,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “There was an increase in refinance activity as a result of the 16-basis-point decline in rates, as both conventional and government refinance applications increased. However, the overall pace of refinance applications was lower than November and December’s 2022 averages, and over 80% lower than a year ago. Refinances were about 30% of all applications last week—well below the past decade’s average of 58%.”

Realtor.com Manager of Economic Research George Ratiu noted, “Capital markets are reacting to the uncertainty brought about by the dichotomy between mounting recession expectations and incoming economic data which show continued resilience.”

Last week’s employment stats from the Bureau of Labor Statistics (BLS) continues to look promising for an economic boost, as total nonfarm payroll employment increased by 223,000 in December, and the unemployment rate edged down to 3.5%, with notable job gains occurred in leisure and hospitality, health care, construction, and social assistance.

“The December jobs report showed only a gradual deceleration in the pace of job growth and a small decline in the unemployment rate,” added MBA SVP and Chief Economist Mike Fratantoni. “The one sign of softness was a reduction in wage growth, now at 4.6% on a year-over-year basis. Although there are an increasing number of high-profile layoffs, particularly in the technology sector and also in the mortgage industry, hiring in other sectors of the economy are more than offsetting these on net. Additionally, November data showed that there were still more than 10 million job openings in the economy. The consistent slowing in the pace of wage growth may reflect employer caution as other data clearly signal a weaker economy in 2023.”

The MBA also reported the refinance share of mortgage activity increased to 30.7% of total applications, up from 30.3% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 7.3% of total applications.

By loan type, the FHA share of total applications decreased to 13.4% from 14% the week prior. The VA share of total applications decreased to 13.2% from 13.4% the week prior. The USDA share of total applications remained unchanged at 0.6% from the week prior.

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