In the mortgage business, November typically represents the start of the slow season. While mortgage rates cooled down significantly from October, it wasn’t enough to overcome seasonal, historic trends and low levels of inventory.
Lock volume declined 10% last month from October, driven by a 12% drop in purchase locks, according to Optimal Blue’s originations market monitor report.
“Cooling economic indicators and dovish commentary from the Federal Open Market Committee (FOMC) meeting at the beginning of November drove a rally in rates across mortgage products,” said Brennan O’Connell, data solutions manager at Optimal Blue.
Following the Federal Reserve’s decision to hold rates steady in November, the spread between the 30-year conforming rate and the 10-year Treasury narrowed by 16 basis points (bps) to 274 bps – the lowest since March.
The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming rate dropped 67 bps in November, finishing the month at 7.11%. Jumbo rates fell 34 bps to 7.61%, FHA dropped 54 bps to 6.90%, and VA dropped 61 bps to 6.79%.
The recent decline in rates incentivized borrowers who took out loans over the last few months to refinance – driving up refi volume by 2% month over month to reach its highest level since February.
The refinance climb included 10% month-over-month growth in rate/term refinance volume, while cash-out refi volume remained essentially flat from October.
Purchase lock counts, which exclude the impact of changes in home prices, were down 13% year over year and 37% from pre-pandemic levels in 2019.
Nonconforming products – including jumbo and expanded guidelines loans – gave up share in November, dropping from 12% to 10% of total production month-over-month.
Origination volume from FHA products rose to 23% of total production in November, up 1% from October.
Other products remained mostly flat in production – including GSE-eligible products at 56%, VA products at 10%, and USDA products at 1%.
The steep drop in rates drove down ARM shares to 6.5% in November from 7.9% in October.
Most metropolitan statistical areas (MSAs) experienced declines in rate lock volume, with the exception of Orlando, Florida (6%), which saw growth in production, and New York, New York (0.9%) and San Antonio, Texas (-0.5%), which both remained flat in month-over-month volume.
The average loan amount dropped to $347,400 from $352,500 and the average purchase price saw the largest decline since October 2022, falling to $438,300 in November from $449,300 the previous month.
“Historic affordability issues are keeping buyers on the sideline and forcing sellers to reduce their expectations,” O’Connell added. “This may signal a downward trend in home prices after an extended period of steady growth.”
