WASHINGTON (7/24/14)--After a sharp drop earlier in the month, mortgage application activity has gained back some ground, as the composite index in the Mortgage Bankers Association's weekly survey gained 2.4% during the week that ended July 18 (Economy.com July 23).
The rebound was driven in large part by refinance activity, which jumped 4.1% for the week, while purchase activity inched up 0.3%, redirecting a 7.6% stumble during the prior week.
Despite the modest gains, however, mortgage application activity has much work to do, as the four-week moving average for purchases has declined 3% and refinances have fallen 3.6%.
Further, refinancing activity sits 45% lower than levels seen at this time last year, while purchase activity is down 14.6% year-over-year.
"Despite last week's uptick, mortgage application activity remains quite subdued," said Gregory Bird, Moody's analyst (Economy.com), who added that because mortgage rates have been held down for so long, many consumers likely already have refinanced, "meaning the potential pool for further activity is probably small."
The contract rate for 30-year fixed-rate mortgages remained at 4.33% for the week; the 30-year fixed rate for jumbo mortgages dropped by 2 basis points; and the rate for five-year adjustable-rate mortgages climbed 4 basis points.
While purchase mortgage activity still hovers near a cyclical low, existing-home sales did tick up, according to numbers released Tuesday by the National Association of Realtors, which reported a 2.6% increase in sales in June.
But the slack in the market may be being picked up by those able to pay cash for homes, as now one-third of all home sales are paid for in cash.
"All-cash transactions ... are providing the impetus for overall sales activity to head higher, while first-time buyers remain on the sidelines for the most part," Bird said.