Mortgage services.

Rising rates and sparse inventories continue to hamper the mortgage market. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, decreased 3.7 percent on a seasonally adjusted basis during the week ended May 26 and was down 5.0 percent on an unadjusted basis.  It was the third straight week of slowing activity. The Refinance Index decreased 7 percent from the previous week and was 45 percent lower than the same week in 2022. The refinance share of mortgage activity decreased to 26.7 percent of total applications from 27.4 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index was down 3 percent compared to the prior week and 4 percent before adjustment. The index was 31 percent lower than the same week one year ago. [purchaseappschart]  “Inflation is still running too high, and recent economic data is beginning to convince investors that the Federal Reserve will not be cutting rates anytime soon. Mortgage rates for conforming balance 30-year loans were being quoted above 7 percent by some lenders last week, and the weekly average at 6.9 percent reached the highest level since last November,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “ Application volumes for both purchase and refinance loans decreased last week due to these higher rates. While refinance demand is almost entirely driven by the level of rates, purchase volume continues to be constrained by the lack of homes on the market.”

One of the major home price indices showed a continued increase in national home prices in March and less waffling in some local markets. A second index, the Federal Housing Finance Agency’s (FHFA’) Housing Price Index (HPI) lengthened its string of quarterly price gains that stretches back to the first quarter of 2012. The S&P CoreLogic Case-Shiller U.S. National Home Price Index which covers all nine U.S. census divisions, reported a 0.7 percent annual gain in March, down from 2.1 percent in the previous month. On a monthly basis, that index rose 1.3 percent on a non-seasonally adjusted (NSA) basis and 0.4 percent after (SA) adjustment. Selma Hepp. CoreLogic Chief Economist credited the 0.7 percent annual increase in the National Index to the spring home buying season and a stronger return to the market of buyers than sellers. “[This] created another competitive market environment and one in which the very meager inventory of existing homes is putting buyers in a position of having to pay over the asking price and as a result driving early spring price gains well beyond what is traditionally seen during this period. But, monthly gains, up 1.3 percent from February, are almost double the increase seen between the two months and suggest housing market competition heated up again in early spring.” The 10-City Composite Index fell 0.8 percent after an annual increase of 0.5 percent in February but posted monthly gains of 1.6 percent NSA and 0.5 percent SA. The 20-City Composite dipped 1.1 percent compared to March 2022 while rising 1.5 percent and 0.5 percent for the month on NSA and SA bases, respectively.

The number of contracts to purchase pre-owned homes was unchanged in April. The National Association of Realtors® (NAR) said its Pending Home Sales Index (PHSI), a forward-looking indicator of existing home sales, remained at the March level of 78.9. The index had seen some improvement over the first three months of the year but is now down 20.3 percent on an annual basis. [pendinghomesdata] NAR Chief Economist Lawrence Yun attributed the lackluster sales during what is usually residential real estate’s most active season is due in part to ongoing inventory restraints. He added, “Affordability challenges certainly remain and continue to hold back contract signings, but a sizeable increase in housing inventory will be critical to get more Americans moving. ” While three of the four major regions saw an uptick in new sales contracts, those changes were negated by a sizeable decline in the fourth. The PHSI in the Northeast fell 11.3 percent from March to 59.1 and was 21.8 percent lower than the prior April. The Midwest’s index improved 3.6 percent to 78.4 which was down 21.4 percent on an annual basis.   Pending sales in the South rose 0.1 percent to 99.6 in April while sinking by 16.7 percent year-over-year. A 4.7 percent increase in the West took that PHSI to 62.2, a 26.0 percent decline from April 2022. The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes which are usually finalized within one or two months.  The PHSI was benchmarked at 100 in 2001, a number equal to the average level of contract activity during that year.