With refinancings and cash-outs waning, net fixed-rate supply for this year is expected to be the lowest since 2000. The current rate of new home sales suggests 2% annual growth in net fixed issuance, says JPMorgan Securities.

ARMs now already make up half of mortgage applications. Also, almost 60% of purchase applications are for ARMs. These factors will lead to no growth in the fixed-rate market, analysts said. Meanwhile, the record level of new home sales only serves as the breakeven, where net fixed-rate supply stays stable. JPMorgan said that if new home sales slow or if the percentage of ARM applications increases, there could be considerable negative net supply in the fixed-rate sector.

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