Ring up another piece of bad news for the housing market, as roaring home prices and mortgage rates continue to hammer the sector.
Mortgage applications dropped a seasonally-adjusted 2.3% in the week ended Aug. 12 from a week earlier, according to the Mortgage Bankers Association. That put the number of applications at its lowest level since 2000.
Refinancing applications dropped 5% from a week earlier and were down 82% from a year earlier. That makes sense since mortgage rates have surged from last year, meaning many homeowners would lose money if they refinanced.
Purchase applications slid 1% from a week earlier and 18% from a year earlier.
“Home-purchase applications continued to be held down by rapidly drying up demand, as high mortgage rates, challenging affordability, and a gloomier outlook of the economy kept buyers on the sidelines,” MBA economist Joel Kan said in a statement.
Price and Mortgage Rate Numbers
As for prices, the median existing-home sales price hit $416,000 in June, up 13.4% from a year earlier, according to the National Association of Realtors. That marked 124 straight months of year-over-year increases, the longest streak on record.
And the 30-year fixed mortgage rate averaged 5.22% in the week ended Aug. 11, up from 2.87% a year ago, according to Freddie Mac.
But Kan sees a potential silver lining for the housing cloud. “If home-price growth slows more significantly and mortgage rates move lower, we might see some purchase activity return later in the year.”
The 13.4% year-on-year price increase for existing homes in June represents a deceleration from the 14.8% increase in May. And the latest 30-year fixed mortgage rate of 5.22% constitutes a drop from 5.81% in the week ended June 23.
Housing Starts, Mortgage Cancellations
In previous housing news, housing starts dropped 9.6% in July from June to an annual rate of 1,446,000. That’s down 8.1% from July 2021 and represents the lowest level since February 2021.
Meanwhile, about 63,000 home-purchase agreements collapsed in July, equal to 16.1% of homes that went under contract that month, up from 15% in June and 12.5% a year earlier, according to real estate brokerage Redfin.
The 16.1% cancellation rate represents the highest since Redfin began compiling the data in 2017, except for March and April 2020, when the covid pandemic began.
“The housing market is slowing, as higher mortgage rates sideline many prospective home buyers,” Redfin said. But there’s a bright side to that.
“With competition declining, the house hunters who are still in the market are enjoying newfound bargaining power,” Redfin said. That’s a “stark contrast from last year, when they often had to pull out every stop in order to win.”