Mortgage applications tumble to lowest levels in three decades

As monthly mortgage payments reached a record high, mortgage applications fell to their lowest level in nearly 30 years.

Redfin reports that mortgage payments have reached a near-record high due to over 7% 30-year mortgage rates in recent weeks.

A scarcity of housing has driven up property prices, as baby boomers choose to stay put in uncertain economic times. The decision is driving housing prices up, and many purchasers out of the market. This has caused affordability pressures to drive housing demand to near-record lows.

Redfin said that the average monthly mortgage payment grew to $2,612 with a 7.18 percent rate in the four weeks ended Sept. 3, $18 behind the May record high.

According to the Mortgage Bankers Association, mortgage-purchase applications fell 28% year-over-year to a 28-year low.

Pending home sales are down 12% year-over-year with homebuyers fleeing the market due to rising prices.

Joel Kan, MBA’s Vice President and Deputy Chief Economist, says refinance applications continue to fall. “Last week’s decline [was] driven by a 5 percent drop in refinance applications to the weakest reading since January 2023.”

Purchase applications increased over the week despite the increase in rates, pushed higher by a 2 percent gain in conventional loans.

A 2% increase in conventional loans boosted purchase applications last week despite rising rates.

“Given how high rates are right now, there continues to be minimal refinance activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate,” Kan told news outlets.

According to Redfin, the typical home price is $378,725, up 4.5 percent year-over-year and the highest since October 2022.

Due to the lack of available properties, many homeowners are unwilling to sell their homes bought at record-low mortgage rates, raising pricing.

Another major aspect is that most U.S. housing markets have more buyers than sellers.

“U.S. homebuyers face harsh conditions as property values and mortgage rates rise. Homeownership costs have never been greater. Many potential purchasers are renting due to low availability and high loan rates,” says Colin O’Leary, Licensed Real Estate Salesperson with Berkshire Hathaway HomeServices Fillmore Real Estate in New York City.

All of this is against a backdrop of rising consumer debt, particularly credit card debt.

The NY Fed noted “credit cards are the most prevalent form of household debt and continue to become even more widespread.” Consider that 70 million more credit card accounts exist currently than in 2019, before the pandemic.

–Dwight Widaman | Metro Voice