Mortgage Demand Falls to 22-Year Low as Home Prices Break Records
July 20, 2022
The U.S housing market continues to rapidly cool as climbing mortgage rates and historic price growth weigh on sales, and economists warn the slowdown may be another sign that the economy is heading toward a recession.
Mortgage demand fell last week to the lowest level since 2000. Applications for a mortgage to purchase a home fell 7% from the week before and were 19% lower than the same week in 2021. Applications for mortgage refinances, which are highly sensitive to chaining mortgage rates, were 80% lower than the same week last year.
Since last year, the average rate for a 30-year fixed rate mortgage has nearly doubled, climbing from 3.11% in July 2021 to 5.82% last week.
This means that prospective buyers are facing a one-two punch of more expensive borrowing and home prices that continue to climb.
The median price of an existing home climbed to $416,000 in June, according to the National Association of Realtors. That’s up 13.4% from a year before and the highest on record in data that goes back to 1999.
At the same time, sales of existing homes continue to slow, falling in June for the fifth consecutive month. Sales for the month were down 5.4%, falling to an annualized rate of 5.12 million units, a level lower than in all of 2019, before the pandemic began.
A housing slump could add additional drag on the economy, and following the release of June’s sales data, Goldman Sach lowered thier forecast for the second quarter GDP by 0.1% and is now projecting growth of just 0.5% for the period between April and June.