Mortgage aficionados are becoming awfully familiar with 2000 as demand keeps cratering to Y2K levels.
For the week ending on July 15, the Mortgage Bankers Association’s index measuring mortgage loan application volume dropped 6.3 percent from the previous week. According to a release from the MBA, it’s at its lowest level in 22 years.
This feels like déjà vu all over again. At the beginning of June, mortgage demand also hit its lowest point since 2000, according to the MBA’s index. Demand had a brief rebound afterwards, but has been on the decline for three straight weeks leading up to the latest report.
An uncertain economic outlook is one of the factors being cited for the drop in demand, as well as higher inflation and affordability challenges for homebuyers, including high home prices and relatively high mortgage rates. The average 30-year fixed rate for conventional loans was 5.82 percent last week, up from 5.74 percent the previous week.
The increased affordability challenges also led to drops in the MBA’s refinancing and purchasing indices.
The refinance index fell 4 percent from the previous week and 80 percent year over year. The purchase index, responsible for tracking mortgage applications to buy homes, dropped 7 percent from the previous week.
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MBA’s Joel Kan (Linkedin)
The drop in activity lined up with the struggles in the homebuilding sector, MBA’s Joel Kan said.
“The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs,” Kan said in a statement.
Points rose to 0.59 from 0.65 (including origination fee) for loans with a 20 percent down payment.
The share of applications through the FHA increased from 11.7 percent to 12.4 percent week over week, demonstrating an appetite from buyers looking to make a small down payment. The share of Veterans Administration applications decreased from 11.2 percent to 10.6 percent, while the USDA share of applications increased from 0.5 percent to 0.6 percent.
The rising mortgage rates — which were at 3.22 percent at the beginning of the year — has some wondering if the country’s housing boom is coming to an end.