Mortgage Applications Hit Four-Year Low, Office Use Remains Subdued, Ukraine War Delivers Price Shoc
Mortgage Applications Hit Four-Year Low
Mortgage applications fell to their lowest level since 2018 in the week ended April 22, sparked largely by rising interest rates, the Mortgage Bankers Association reported Wednesday.
The trade group’s index measuring loan application volume for new purchases and refinancings declined 8.3% from the prior week, as mortgage rates climbed to their highest levels since 2009.
“The drop in purchase applications was evident across all loan types,” Joel Kan, the trade group’s associate vice president of economic and industry forecasting, said in a statement. “Prospective homebuyers have pulled back this spring, as they continue to face limited options of homes for sale along with higher costs from increasing mortgage rates and prices.”
Kan added that the decrease in purchase applications “is an indication of potential weakness in home sales in the coming months.” Signs are emerging that borrowers are reacting to the latest interest rate shifts by turning more toward adjustable-rate mortgages, which have generally been out of favor after years of historically low fixed rates.
According to the trade group, the average contract interest rate for 30-year, fixed-rate mortgages with balances of $647,200 or less increased to 5.37% as of April 27 from 5.2% a week earlier. The average interest rate for adjustable-rate mortgages, with the rate fixed only for the first five years, increased to 4.28% from 4.09% in the prior week.
Office Use Remains Subdued
Workers are still not stampeding back to offices, even with plentiful vaccinations and the easing of government pandemic restrictions. Still, about half of major metropolitan regions tracked by security services firm Kastle Systems saw their office use tick up in late April compared with month-earlier levels.
The Falls Church, Virginia-based company uses anonymous keycard data gathered from thousands of U.S. buildings to track office attendance. Kastle reported rates for the week ended April 20 were down slightly from the two prior weeks in all of the 10 regions it tracks, partly because of spring break and Easter holiday scheduling.
But comparing the April 20 numbers with those of the same point a month earlier, half of those regions saw their numbers rise, led by Austin, Texas, at 58.8% of pre-pandemic levels compared with 52.9% for the third week of March. The vast majority of regions remain below 40% for their office attendance, and the only three climbing above 50% during April were in Texas: Houston, Dallas and Austin.
Regions showing a slight month-over-month downturn as of April 20 included New York City, Philadelphia, Dallas, Washington, D.C., and San Jose, California. Slight upticks were seen in Chicago, Houston, San Francisco. Los Angeles and Austin.
Cumulative Kastle data shows nationwide office usage generally has been generally edging higher for the past year, with occasional sharp drop-off during times of rising cases recorded for coronavirus variants.
Ukraine War Delivers Pricing Shocks
The war in Ukraine is likely to bring rising prices, from the gas pump to grocery store shelves and construction sites, at least through the end of 2024, according to the World Bank.
In a commodities outlook report this week, the Washington, D.C.-based global development organization said the war’s widespread disruptions of trade, production and consumption are expected to raise energy prices more than 50% during 2022, before easing over the next two years while staying at elevated levels. Crude oil is expected this year to reach its highest prices since 2013.
Global wheat prices are forecast to increase more than 40% this year, putting pressure on economies that rely on the grain import for food production, especially from Russia and Ukraine. In a particular concern for construction projects, metal prices are projected to rise 16% in 2022 before easing next year.
“Commodity markets are under tremendous pressure, with some commodity prices reaching all-time highs in nominal terms,” John Baffes, a senior economist with the World Bank, said in a statement. “This will have lasting knock-on effects.”
Indermit Gill, the organization's vice president for growth and finance, described the war-fueled situation as "the largest commodity shock we've experienced since the 1970s."