Despite the lowest interest rates in nearly three years, the number of people applying for a mortgage barely moved last week.
Total volume increased 0.4 percent from the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association (MBA).
Applications to refinance, which are most rate-sensitive on a weekly basis, rose 0.5 percent. They are now 23 percent higher than one year ago, when interest rates were slightly higher.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.82 percent from 3.87 percent, with points decreasing to 0.34 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio loans, according to the MBA.
Rates moved even lower at the start of this week, hitting their lowest level in three years, according to Mortgage News Daily. Rates stayed low despite some strength in the stock market, which usually pushes bond yields down; mortgage rates loosely follow the yield on the 10-year Treasury. Three years ago, when the Federal Reserve hinted it would begin to "taper" its investments in mortgage-backed bonds, rates moved decidedly higher quickly.
"Despite expectations that rates would slowly rise this year, the 30-year fixed rate last week was 18 basis points lower than a year ago, continuing to provide a favorable rate environment for the housing market," said Lynn Fisher, MBA vice president of research and economics.
The rates are favorable, but potential homebuyers are facing higher prices in most markets and still lean supply, especially for more affordable homes. Mortgage applications to purchase a home rose just 0.4 percent for the week, seasonally adjusted. While they are 14 percent higher than one year ago, volume has not improved much in the last four weeks, the height of the historically robust spring housing market.
The lack of homes for sale is clearly taking out the tailwind of lower rates. Homebuilders are not putting up nearly enough to meet demand, and while sellers increasingly feel like they're in the driver's seat, they're still not listing their homes for sale.
"Even though it's a sellers' market nationally, homeowners often have to make a leap of faith to list their properties because there may not be a more desirable home to move to," said Redfin chief economist Nela Richardson. "We are now starting to see sellers' anxiety play out in the data. After steady growth in new listings over the last three months, early readings suggest that fewer homes are being listed in May than we saw listed in May last year in many markets."