For home buyers, mortgage demand is locked at lows

Daniel Acker | Bloomberg | Getty Images

Mortgage application volume increased last week and, in an odd coincidence, the move was the same as the previous week, but in the opposite direction.

Total volume rose 7.3 percent week-to-week, according to the Mortgage Bankers Association (MBA), the same amount it fell two weeks before. The move was, again, driven by refinance volume, which rose 13 percent – the same amount it fell the previous week. In other words, we're right back where we were two weeks ago.

Applications to purchase a home seem equally stuck, increasing just one percent from the previous week. On an annual basis, purchase applications are 4 percent lower, just as they were in last week's report. This as interest rates continue to vacillate by very few basis points.

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"You're looking at the first time I can ever remember in the last 33 years where you had interest rates fall all year long in a up cycle, and mortgage purchase applications have had a negative year-over-year print every single week," noted Logan Mohtashami, a loan officer with AMC Lending Group in Irvine, CA.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.11 percent last week from 4.08 percent the previous week, for 80 percent loan-to-value ratio (LTV) loans, according to the MBA.

"There's not really much to be said about this strength in mortgage rates apart from the fact that 'it's nice,'" wrote Mortgage News Daily's Matthew Graham in a daily note. "It's nice that we're getting enough spillover from all-time low European bond yields, and it will stop being nice whenever Europe turns a major corner."

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When that will be is the subject of much debate, but there is no real target. Meanwhile, the share of all-cash home sales has been falling for 21 months, according to CoreLogic, but it remains inflated by historical standards. Recent policy changes by mortgage giants Fannie Mae and Freddie Mac, as well as new clarifications for lender liability, signal a focus by the industry on loosening today's tight credit conditions, but the results have yet to be felt on the ground.