Mortgage hunters were not particularly impressed with the latest drop in interest rates.
Mortgage application volume dropped 0.6% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 10% higher than a year ago, when interest rates were higher.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.40% from 4.41%, with points decreasing to 0.40 from 0.47 (including the origination fee) for loans with a 20% down payment. Although minute, that was the third week of declines in mortgage rates. The rate was 37 basis points higher a year ago.
Mortgage refinance volume, which is most sensitive to rates, fell 1% for the week but was nearly 17% higher annually. Last year, refinance volume fell sharply on higher rates.
Mortgage applications to purchase a home fell 1% for the week but were nearly 7% higher annually. Homebuying this spring has underperformed expectations, as prices remain high and the supply of lower-end homes remains painfully constrained. The same uncertainty in the economy that is causing interest rates to fall may also be causing some buyers to pull back.
"It's worth watching if ongoing global trade disputes lead to increased anxiety about the economy, which could cause some potential homebuyers to put off their home search until the uncertainty is resolved," said Joel Kan, an MBA economist.
Builders meeting at a conference in Southern California this week expressed concern about affordability, especially given higher costs for labor, land and now new tariffs on some Chinese products that go into housing.
"Word on the street among all builders is what are we going to do about affordability," said Gene Myers, CEO of Denver-based Thrive Home Builders. "Builders just don't have a big cushion. It's actually a surprisingly low-margin industry so we have no choice when the costs go up, the customer will end up paying."