Blog
Mortgage Demand Falls to 28-Year Low As Rates Climb
August 22, 2023
Mortgage rates have skyrocketed again in recent weeks, putting demand for mortgages at the lowest level in nearly three decades.
Total mortgage applications were down 4.2% from a week prior, putting them 30% lower than during the same week last year, according to the Mortgage Bankers Association (MBA).
Mortgage demand, for home purchases specifically (as opposed to refinances), has fallen to the lowest level since April 1995. MBA economists attribute the downturn to ” the elevated rate environment and the erosion of purchasing power.”
The Federal Reserve’s aggressive rate hikes to combat inflation have sent mortgage rates surging and placed a major drag on the housing market. The average rate for a 30-year fixed-rate mortgage jumped 15 basis points to 7.31% last week, the highest rate since December 2000.
The prospect of higher borrowing costs and climbing home prices has left many buyers priced out of the market and brought the typically busy summer homebuying season to a crawl.
Home sales fell in July for the fourth time in five months. Sales of existing homes, which make up the majority of purchases, were down 2.2% in July from the prior month, for a seasonally adjusted annual rate of 4.07 million, according to the National Association of Realtors (NAR). That was the slowest monthly sales pace since January, but to find a slower July, you would have to go back to 2010.
Despite the slowdown in sales activity, home prices continue to climb, with the national median existing-home price climbing 1.9% in July from a year prior to $406,700. This is only the fourth time on record that this figure has risen over $400,000, according to the NAR. This is in part because of low inventory. With mortgage rates so high, owners are reticent to put their homes on the market because they are locked into much lower rates. The inventory of homes for sale in July was 16.6% lower than from a year earlier.
