The US housing market’s slump has intensified with another weekly decline in mortgage applications as higher rates scare off buyers.
The volume of mortgage applications sank 3.7% for the week ending Aug. 26 compared to the previous week, according to the Mortgage Bankers Association’s weekly survey.
Meanwhile, the volume of purchase applications sank 2% over the same period.
“Application volume dropped and remained at a multi-decade low last week, led by an 8% decline in refinance applications, which now make up only 30% of all applications,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
“Purchase applications have declined in eight of the last nine weeks, as demand continues to shrink due to higher rates and a weaker economic outlook,” Kan added.
The latest downtick in activity coincided with another spike in mortgage rates, which had cooled slightly from June highs only to surge again as the Federal Reserve signaled plans for long-term policy tightening. Mortgage applications have remained at nearly 22-year lows for months.
Mortgage application volume was down 63% compared to the same week a year ago, while purchase applications were down 23% year-over-year.
The average contract interest rate on a 30-year fixed-rate mortgage spiked to 5.80% last week, according to the MBA’s data. That was up from 5.65% the previous week.
The pandemic-era real estate boom has slowed considerably in recent months as cash-strapped buyers contend with high inflation, steeper mortgage rates and an economic slowdown. The Fed is expected to pursue interest rate hikes through at least the end of this year, likely pushing mortgage rates even higher.
The deteriorating conditions have sparked mounting fears of a “housing recession,” with Goldman Sachs warning this week that home price growth will “stall completely” in 2023. Other economists have warned that prices have already started to fall.
Slowing demand and price growth “could potentially bring some buyers back into the market later this year,” according to Kan.
Ex-Brit turned Manhattan resident since 2008.