The lowest interest rates in nearly a year were not enough incentive to juice mortgage demand.
Total mortgage application volume fell 3.7 percent last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 11 percent lower than a year ago, even though rates were only a tiny bit higher then.
The drop-off was primarily in applications to purchase a home. They fell 6 percent for the week and were 5 percent lower than a year ago. Some real estate agents have been reporting more traffic at open houses, as more listings come on the market, but apparently that interest is not turning into demand for home loans. Prices are still very high, and the supply of lower-end homes is still very lean. Mortgage rates are lower than they were last fall, but not enough to really make a difference for some buyers.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.65 percent from 4.69 percent, with points decreasing to 0.43 from 0.45 (including the origination fee) for loans with a 20 percent down payment. That was the lowest level since March.
"Application activity fell last week — even with rates decreasing — as renewed uncertainty about the domestic and global economy likely held potential homebuyers off the market," said Joel Kan, MBA's associate vice president of industry surveys and forecasts. "Despite the recent decline in applications, we still expect that the continued strength of the job market and lower rates will support more purchase activity in the coming months."
Applications to refinance a home loan, which are far more sensitive to weekly interest rate moves, did not get a bounce either. They fell 0.1 percent for the week and were 17 percent lower than a year ago. The refinance share of mortgage activity increased to 43.2 percent of total applications from 41.6 percent the previous week.
Mortgage rates held steady to start this week, even as the stock market surged Tuesday on news that a potential budget deal might avert another government shutdown. There is also renewed hope of progress in trade talks with China. If investors start to feel more confident about things politically, they may pull out of the safety of the bond market, and that would send mortgage rates higher.