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There were two storms brewing last week and each contributed to driving mortgage applications to generational lows. The Mortgage Bankers Association (MBA) said the continuing rise in interest rates and the devastating hurricane that hit Florida and the Carolina’s contributed to a double-digit decline in its indices that measure mortgage application volume. The Market Composite Index for the week ended September 30 was down 14.2 percent on a seasonally adjusted basis from one week earlier and 14 percent before adjustment. The Refinance Index fell 18 percent from the previous week and was 86 percent lower than the same week one year ago. The refinance share of mortgage activity dipped to 29.0 percent from 30.2 percent the previous week. The Purchase Index dropped by 13 percent week-over-week on both an adjusted and an unadjusted basis. It was down 37 percent from the same week in 2021. MBA’s Associate Vice President of Economic and Industry Forecasting, Joel Kan said, “Mortgage rates continued to climb last week, causing another pullback in overall application activity, which dropped to its slowest pace since 1997. The 30-year fixed rate hit 6.75 percent last week – the highest rate since 2006. The current rate has more than doubled over the past year and has increased 130 basis points in the past seven weeks alone. The steep increase in rates continued to halt refinance activity and is also impacting purchase applications, which have fallen 37 percent behind last year’s pace. Additionally, the spreads between the conforming rate compared to jumbo loans widened again, and we saw the ARM share rise further to almost 12 percent of applications.”
Spending on residential construction, while down a bit in August and in spite of the gloom and doom about the housing market, continues to run significantly higher than in 2021. This is also true, although to a lesser extent, for construction spending as a whole. The U.S. Census Bureau put spending on all public and privately funded construction during the month at a seasonally adjusted annual rate of $1.781 trillion, down from $1.794 trillion in July, a month-over-month decline of 0.7 percent. Annualized spending, however, was 8.5 percent higher than in August 2021. For the year-to-date (YTD), spending has totaled $1.184 trillion, up 10.9 percent compared to the first eight months of 2021. Funding for private construction of all types was at a seasonally adjusted rate of $1.426 trillion in August, an 0.6 percent decline from July, but 9.9 percent higher than a year earlier. On a non-adjusted basis, private projects consumed $129.860 trillion during the month and $952.901 billion YTD. The latter figure is 13.9 percent higher than for the same period in 2021. Total spending on residential construction, including new single-family and multifamily units and money spent on renovations and remodeling, was at a seasonally adjusted annual rate of $912,913 billion, down 0.9 percent from July and the third consecutive decline. The number was 12.5 percent higher than in August 2021, however, that annual increase has to be attributed to the home improvement sector which was up 37.2 percent from August 2021. Annualized single-family spending fell by 2.9 percent for the month and was nearly identical to that in August of 2021 at $436.308 billion. Multifamily spending was up 0.4 percent for the month and down 0.2 percent on an annual basis.
Average mortgage interest rates increased significantly during the week ended September 23. As a result, the Mortgage Bankers Association (MBA) said the volume of mortgage applications gave back most of its prior week gains when it had increased for the first time in six weeks. The Market Composite Index, a measure of mortgage loan application volume, decreased 3.7 percent on a seasonally adjusted basis from one week earlier and was 4 percent lower on an unadjusted basis. The Refinance Index dropped back by 11 percent week-over-week and was 84 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 30.2 percent from 32.5 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index decreased 0.4 percent from one week earlier and was 1 percent lower before adjustment. Applications were down 29 percent compared to the same week in 2021. [purchaseappschart] “Applications for both purchase and refinances declined last week as mortgage rates continued to increase to multi-year highs following more aggressive policy measures from the Federal Reserve to bring down inflation,” Joel Kan said. “Additionally, ongoing uncertainty about the impact of the Fed’s reduction of its MBS and Treasury holdings is adding to the volatility in mortgage rates. The 30-year fixed rate was 6.52 percent, its highest level since mid-2008. After a brief pause in July, mortgage rates have increased more than a percentage point over the past six weeks .”