It may be the heart of the spring housing season, but the mortgage market isn't seeing big business.
Mortgage application volume fell 4.3% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 4.5% higher annually, thanks to stronger refinance activity.
While applications to refinance a home loan were 5% percent lower for the week, they were still 11% higher than a year ago, because interest rates were 38 basis points higher then. Refinance volume overall, however, is still much lower than normal because so many homeowners refinanced to the historically low rates that followed the last housing crash.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.42% from 4.46%, with points increasing to 0.46 from 0.44 (including the origination fee) for loans with a 20% down payment.
"Mortgage rates were lower last week, as concerns over global growth, particularly in Germany, outweighed more positive domestic news on first quarter GDP growth and business investment," said Joel Kan, MBA's associate vice president of economic and industry forecasting.
Lower rates didn't get more buyers off the fence, either. Mortgage applications to purchase a home fell 4% for the week and were barely 1% higher from a year ago. Purchase volume has been weakening this month, despite brighter signs in the overall housing market. There is more supply of homes for sale, and overheated home prices are finally beginning to chill.
Home sales are sending mixed signals right now. Sales started the year weaker, but pending home sales in March jumped more than expected. Pending sales are based on signed contracts. Sales of newly built homes, also measured in contracts, jumped in March as well. That sales surge may have been due to a sharp drop in mortgage rates. Rates have since edged higher, but not by much.
The fact that today's buyers are so sensitive to the latest mortgage rate swings shows just how much they are struggling to afford homes at all, especially first-time buyers. Supply is leanest on the low end of the market, and that is where the bulk of buyers are. Even as some higher-end homes sit on the market longer, it is still not uncommon in many metropolitan markets to see heavy competition for lower-priced homes. Most of the stagnation in sales is on the highest end of the market, where supply is plentiful.
Mortgage rates started this week slightly higher, but there is big economic data ahead that could swing rates in either direction. The Federal Reserve will make a policy announcement Wednesday afternoon, and the monthly employment report is set to be released on Friday.
WATCH: Pending home sales jump 3.8 percent