High prices and low supply are finally taking some of the heat out of the housing market.
Even with interest rates falling slightly, mortgage application volume fell 4% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. It fell to the lowest level since February 2020.
Applications for a mortgage to purchase a home fell 3% for the week and were 2% lower than a year ago. This is the second straight week that purchase demand was lower than a year earlier, even though mortgage rates are still lower.
Pending home sales, which are counted by signed contracts and are therefore an indicator of future closed sales, dropped a wider-than-expected 4.4% in April, according to the National Association of Realtors.
Buyers are clearly starting to hit an affordability wall. This is especially clear from the government loan demand. FHA and VA loans offer low or even no down payment options for borrowers with lower incomes and credit scores.
“Tight housing inventory, obstacles to a faster rate of new construction, and rapidly rising home prices continues to hold back purchase activity,” said Joel Kan, an MBA economist. “The government purchase index declined to its lowest level in over a year and has now decreased year over year for five straight weeks.”