Declining Purchase Volume and Mortgage Demand Signals Buyer Pullback

Large year-over-year increases in both mortgage applications and purchase volume are closing in on 2019 levels, pointing to a potential homebuyer cooldown. CNBC reports that mortgage applications dropped 0.8% for the two weeks ending Jan. 1 compared to the second week of December. The timing may seem to blame the holiday season, yet these numbers, received from the Mortgage Bankers Association, took holidays into account, says CNBC. A more drastic difference can be found in the purchase volume, which only stood above last year’s rates by 3%. In the most recent months, purchase volume has typically been around 20% higher compared to last year.

Home prices have been rising at increasing speed, and that may be sidelining more and more buyers even with near record low mortgage rates.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 2.86% from 2.90% to finish out the year. Points increased to 0.35 from 0.31 (including the origination fee) for loans with a 20% down payment. Mortgage demand from buyers pulled back in the last two weeks of 2020, likely due to fast-rising prices.

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