The MBA's Market Composite Index, a measure of weekly application activity based on surveys of the trade group's members, fell a seasonally adjusted 5.2% for the period ending May 31. One week earlier, the index registered a similar 5.7% decline to fall to its lowest mark since early March. Compared to the same seven days in 2023, volumes were also 7.3% lower. 

Mortgage rates movements failed to provide any business momentum, with readings mostly flat. The 30-year conforming fixed average edged up 2 basis points to 7.07% among MBA lenders. One week earlier, the rate averaged 7.05% for loans with conforming balances that make them eligible for sale to the government-sponsored enterprises. Points used to buy down the rate climbed higher by 2 basis points to 0.65 from 0.63 for 80% loan-to-value ratio loans. 

"After adjusting for the Memorial Day holiday, both purchase and refinance application volumes were down," said Mike Fratantoni, MBA senior vice president and chief economist, in a press release. 

The seasonally adjusted Purchase Index dropped 4.4% from the previous week. On a year-over-year basis, applications declined 12.8% amid ongoing affordability constraints. MBA's newest findings correspond to other recent home buying trends, pointing to diminished buyer interest coinciding with the recent upward movement  in rates.

The home buyer demand index from Redfin, which tracks requests for tours and services from the brokerage's agents, tumbled  7% month-to-month as of May 23. Google searches for "homes for sale" flattened, but were 14% lower from the same period last year.

With many homeowners reluctant to move due to the low interest rates they currently possess, lenders and sellers may find the best opportunities among consumers new to the housing market as they look for near-term business, said Fratantoni. 

"The market is relying on first-time home buyer demand, and many first-time buyers do use government-lending programs," he said. While federally sponsored purchase applications also declined last week, they did so at a more muted pace of 1.6%, the MBA said.

On a similar note, at the end of the fourth quarter, research from Transunion found origination volumes of Federal Housing Administration-backed mortgages, which are often used by buyers for their first home, rising on an annual basis. It was the only category of mortgages tracked by the firm to see a gain in two years.

The MBA Refinance Index, meanwhile, took a larger 6.8% plunge from the previous survey period. But compared to the same seven days last year, refinances took a 5.8% bump upward. Refinances relative to overall volume shrank to a 31.1% share from 31.3% seven days earlier. 

Adjustable-rate mortgage applications garnered a slightly larger slice, though, rising to 6.7% from 6.4%, up for the first time in three weeks. 

The seasonally adjusted Government Index slipped a seasonally adjusted 3%, but federally guaranteed loans managed to grow their share thanks to a steeper drop in conventional lending. The portion of loans sponsored by the Federal Housing Administration increased to 13.2% from 12.7% in the prior survey. Department of Veterans Affairs-backed applications nabbed 12.1% compared to 12% seven days earlier, but the share of loans coming through the U.S. Department of Agriculture inched down to 0.3% from 0.4%.

Similar to the conforming average, other 30-year fixed rates remained close to their marks of the previous week. The average fixed rate of 30-year jumbo loans dropped 1 basis point to 7.21% from 7.22%. Borrowers typically used 0.41 in points compared to 0.43 for 80% LTV-ratio applications.

The mean 30-year FHA-backed mortgage rate averaged 6.87%, finishing 2 basis points higher from 6.85%. Points climbed up to 0.96 from 0.95.

The 15-year contract fixed rate took a larger jump to average  6.75% compared to 6.66% week over week. Borrower points used slid to 0.63 from 0.69.

The 5/1 adjustable-rate mortgage finished at an average of 6.37%, a 27 basis point fall from 6.64% the previous week. Points came in lower at 0.63, down from 0.77.