Mortgage demand has plummeted to a 25-year low as skyrocketing long-term rates continue to hammer the US housing market, a leading industry group said Wednesday.
Mortgage rates rose for the 10th straight week, with the average 30-year fixed rate contract hitting 7.16%, according to the Mortgage Bankers Association. Rates have reached their highest level since 2001, effectively crushing the volume of applications among financially wary Americans.
The volume of home purchase applications fell 2% for the week ending Oct. 21 and is down 42% year-over-year. Refinance applications increased slightly to 0.1% for the week, but declined 86% compared to the same week one year earlier.
Mortgage application activity is currently at its lowest level since 1997. The housing sector’s ongoing slump likely to get worse next year, according to Joel Kan, the MBA’s vice president and deputy chief economist.
“MBA’s forecast expects both economic and housing market weakness in 2023 to drive a 3 percent decline in purchase originations, while refinance volume is anticipated to decline by 24 percent,” Kan said in a statement.
A pandemic-era boom in the housing sector has abated in recent months as the Federal Reserve sharply hiked interest rates. Mortgage rates more than doubled this year in response to the tightening monetary policy – further crimping affordability challenges for prospective homebuyers facing steep prices and decades-high inflation.
The substantial cooldown has forced many home sellers to slash their asking prices to lure in potential buyers.
Home prices fell 1.1% from July to August alone, according to the latest findings from the S&P CoreLogic Case-Shiller National Home Price Index. The month-over-month decline was the largest on record since December 2011.
Home prices are in the midst of a “forceful deceleration,” according to Craig J. Lazzara, Managing Director at S&P DJI.
“As the Federal Reserve moves interest rates higher, mortgage financing becomes more expensive, and housing becomes less affordable. Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate,” Lazzara added.
Existing-home sales have fallen for eighth consecutive months as mortgage rates squeeze the market.
As The Post reported, Ian Shepherson, chief economic at Pantheon Macroeconomics, warned last week that cratering demand could cause home prices to plunge 20% by next year.
Ex-Brit turned Manhattan resident since 2008.