Mortgage loan applications last week fell to the lowest level since 1995 as mortgage rates rose, the Mortgage Bankers Association reported Wednesday.
The MBA’s seasonally adjusted Purchase Index, which gauges mortgage applications for single-family homes, plunged 18% from a week ago, while the unadjusted index fell 4% from a week ago and 41% from this time last year, the MBA said on Wednesday morning.
EXISTING-HOME SALES DOWN NEARLY 37% FROM A YEAR AGO
The decline came as mortgage rates surged. The average rate for a 30-year fixed-rate mortgage jumped by nearly a quarter percentage point to 6.62%, the highest rate since November. Higher mortgage rates drag down housing demand and cause mortgage application volume to fall in turn.
“The jump led to the purchase applications index decreasing 18% to its lowest level since 1995,” said Joel Kan, MBA’s vice president and deputy chief economist. “This time of the year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected.”
“The increase in mortgage rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates,” Kan added.
The news comes amid a larger rout in the housing market, with many economists declaring that the entire market is in the grips of a recession.
Earlier this week, it was announced that sales of existing homes have fallen for twelve straight months, with sales in January down a hefty 36.9% from the year before. Existing-home sales fell by 0.7% in January to a seasonally adjusted annual rate of 4 million, according to a report by the National Association of Realtors released Tuesday.
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The median existing-home price last month was $359,000, an increase of 1.3% from the year before. Additionally, homes typically remained on the market for 33 days in January, an increase from 26 days in December and 19 days in January 2022 — indications of a still-flagging housing market.
“Home sales are bottoming out,” said NAR Chief Economist Lawrence Yun. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”
