Mortgage applications sank to their lowest level since the turn of the century earlier this month as the combination of rising mortgage rates, low housing inventory, skyrocketing inflation and historically high home prices sent many potential buyers to the sidelines.
Weekly mortgage application volume in the U.S. fell 6.5% during the week ending June 3, 2022, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The result included an adjustment for the Memorial Day holiday.
On an unadjusted basis, the Index declined 17% compared with the previous week. The Refinance Index fell 6% and closed the week 75% lower than the same period one year earlier. The unadjusted Purchase Index decreased 18% from the previous week and 21% from the previous year.
Weakness in both purchase and refinance applications pushed the market index to its lowest level in 22 years, Joel Kan, the MBA’s Associate Vice President of Economic and Industry Forecasting, said in a press release. The market was hurt by a rise in the 30-year fixed mortgage rate, which climbed to 5.4% during the week following three consecutive declines.
“While rates were still lower than they were four weeks ago, they remain high enough to still suppress refinance activity. Only government refinances saw a slight increase last week,” Kan said. “The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past months. These worsening affordability challenges have been particularly hard on prospective first-time buyers.”
Mortgage rates moved even higher at the beginning of this week, CNBC reported, citing a separate survey by Mortgage News Daily. Rates have been in a narrow range for several weeks after pushing much higher earlier in the year.
“There’s some chance that the upper boundaries of that range end up being a ceiling for rates, but that will depend on inflation and other incoming economic data,” Matthew Graham, chief operating officer at Mortgage News Daily, wrote in a note.
Meanwhile, average U.S. home prices in March rose 20.6% from the previous year – the highest gain in more than 35 years of data – according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, released May 31.
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This article originally appeared on GOBankingRates.com: Mortgage Applications Drop 6.5% as the Inability To Afford a Home Continues To Increase