Mortgage Activity At Decade Lows

One of the most closely watched indicators for the housing market is showing some red flags. While housing still remains strong, the market is clearly slowing. Compared to what we have seen in terms of record demand, the past few months have showed a change in the narrative. A closely watched gauge showing mortgage activity, which means applications and refinances, slowed to a two-decade low last week. It is clear to see the impact of higher housing prices and higher borrowing costs. The current economic landscape has shifted just enough to slow the housing market hysteria. Mortgage activity at decade lows could mean a changing market in the coming months.

Mortgage Activity At Decade Lows Indicators

The MBA (Mortgage Bankers Association) runs a housing market index. This index tracks the mortgage loan application on a week-to-week, month-to-month, and year-to-year basis. In the last week, we have seen mortgage loan applications sink 6.5%. This is likely because of the higher mortgage rates making it a lot harder to buy more expensive houses. The decline marks the fourth straight week of declines, and comes off the heels of a 2.3% drop the week before.

Refinance applications saw a similar trend over the past month, and broke decade lows as well. Applications to refinance decreased by 6% week-over-week. Also, new purchases fell 7% from the prior week, seasonally unadjusted. This shows that home purchases are also 21% lower than this time last year. Coming from a 3% mortgage rate and lower prices, it was only a matter of time before we saw this shift.

Mortgage Activity Experts

“Weakness in both purchase and refinance applications pushed the market index down to its lowest level in 22 years,” according to Joel Kan, MBA’s associate vice president of economic and industry forecasting. “While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity. Only government refinances saw a slight increase last week.”

“The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months,” Kan added. “These worsening affordability challenges have been particularly hard on prospective first-time buyers.”

Average mortgage rates were slightly lower than last week at 5.09%. This is still up almost 2% in 2022, but still down from the mid-May high of 5.3%. The MBA report adds more housing market data that helps underscore the cooling demand. Demand will likely continue to cool after the summer months, and interest rates will likely creep higher. New home sales slid by as much as 16.6% in April, reaching a 2-year low. This brings us back to the pandemic time, so those numbers are hard to justify. The median home price soared to a record high of $391,200. Couple that with 5% mortgage rates and it is obvious why we slowed in the market.