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Weekly mortgage applications fall, but hint at who is buying homes today

Key Points
  • A slight rise in interest rates caused a pullback in mortgage demand last week.
  • Total application volume fell 2.5 percent, while volume was 2 percent lower compared with the same week one year ago.
  • Entry-level buyers have been plagued by a short supply of affordable homes for sale.
A property for sale in Monterey Park, California
Frederic J. Brown | AFP | Getty Images

A slight rise in interest rates caused a pullback in mortgage demand last week.

Total application volume fell 2.5 percent week to week, according to a seasonally adjusted index from the Mortgage Bankers Association. Volume was 2 percent lower compared with the same week one year ago.

Purchase demand fell 3 percent for the week, despite more homes coming onto the market and Presidents Day weekend marking the unofficial start of the usually busy spring housing season. Volume was just 1 percent higher than the same week one year ago. Those buyers who were in the market, however, were seeking higher-priced homes.

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"The average loan size for purchase applications increased to a record high, led by a rise in the average size of conventional loans," said Mike Fratantoni, MBA senior vice president and chief economist. "This suggests that move-up and higher-end buyers have so far become a greater share of the spring market."

Entry-level buyers have been plagued by a short supply of affordable homes for sale. The increase in listings has been mainly on the move-up and high end.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.67 percent from 4.65 percent, with points increasing to 0.44 from 0.42 (including the origination fee) for loans with a 20 percent down payment.

That tiny increase was enough to pull refinance demand down 2 percent for the week and 6 percent compared with a year ago. Interest rates are almost exactly the same now as they were a year ago, so there is not a huge incentive for borrowers to refinance. Most borrowers already refinanced when rates were in the 3 percent range. Those who might want to pull cash out of their homes are more likely to take out a second loan, rather than lose that rock-bottom rate on their primary mortgage.

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Key Points
  • Home values in January were 4.4 percent higher than a year earlier, the smallest gain since August 2012, according to CoreLogic.
  • Price gains have been shrinking since April, when they peaked at a 6.6 percent gain.
  • Lower mortgage rates now could reignite the heat under home prices