Mortgage Bankers Association data indicates that applications for home purchases in the US have dropped to their lowest point in 28 years.
Recent data from the Mortgage Bankers Association reveals a significant decline in Americans’ interest in the housing market, marking a trend not seen in decades. Mortgage applications for home purchases have fallen for the sixth consecutive week, reaching their lowest point since 1995.
According to the report released on Wednesday, total mortgage applications dropped by 4.2% compared to the previous week leading up to August 18, as reported by the property group. In addition, the data indicated that the average 30-year fixed mortgage rate has risen to 7.31%, reaching its highest level since 2000.
Simultaneously, the MBA’s Refinance Index also recorded a 6% decrease from the previous week and a substantial 35% drop compared to the same period in 2022.
Joel Kan, the vice president and deputy chief economist at MBA, commented on the situation, stating, “[H]omebuyers are stepping back from the market due to the current high-rate environment, which is diminishing their purchasing power.” He added, “Persistently low housing supply is contributing to elevated home prices in many markets, further intensifying the affordability challenges faced by potential buyers.”
The Mortgage Bankers Association’s survey, which has been conducted weekly for over three decades, provides insights into 75% of all US retail residential mortgage applications. Recent data indicates that the current state of the housing market is even less affordable than during the peak leading up to the 2008 financial crisis. In June, the Atlanta Fed’s Home Ownership Affordability Monitor dropped to 69.5, down from 70.5 in May, while in July 2006, it reached a low point of 71.5.
Another report from the National Association of Realtors, released on Tuesday, revealed a 2.2% decline in existing home sales in July, marking the lowest level since the beginning of 2023. This decline becomes more significant when considering the year-over-year figure, which shows a substantial 16.6% decrease. Coupled with a 14.6% annual drop in housing inventory, this paints a picture of a historically unaffordable and constrained housing market.
Goldman Sachs strategists had initially predicted a 2.2% decrease in home prices for 2023, but their latest assessment revises this outlook to a 1.8% increase. They noted that new listings are entering the market at a record-low pace, resulting in a positive net absorption despite a relatively low volume of purchase applications.