After an uptick last week, mortgage applications sank again, falling to their lowest level in a month as rates surged.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – decreased by 4.4%, wiping out last week’s 3% gains.
Adjusted purchase applications fell by 5%, though the unadjusted index rose 6% from the week before and 22% lower YOY.
Refinances dropped, down 4% from the week prior. They remain 30% lower than the same time last year, comprising only 27.4% of total applications. In the past decade, refis averaged 58% of total activity.
The average interest rate for 30-year fixed loans rose from 6.75% to 6.85%. This is the highest rate since the end of May.
“Rates are still over a percentage point higher than a year ago, and housing affordability is still a challenge in many parts of the country. However, the average loan size for a purchase application declined to $423,500 – its lowest level since January 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
“This was likely driven by reduced purchase activity in some high-price markets and more activity in some of the lower price tiers as buyers searched for more affordable options.”
Americans can’t afford the same houses they could last year, leading to declines in high price markets. The nation’s 70 most expensive markets have all seen prices drop since last year by an average of 6.4%.
The steepest home price drops are occurring in the West where prices soared during the pandemic. At the same time, East Coast demand has been trending up thanks to its relative affordability.
“We’ve never seen anything quite like this where it’s so stark, west to east,” Andy Walden, vice president of enterprise research strategy at Black Knight, told the Wall Street Journal.
But prices have ticked up across the nation as low inventory has kept buyers in competition. Redfin reported that the average home is once again selling for over asking price, the first time it’s topped that threshold in nearly a year.
The FHA share of total applications rose to 13% from 12.9%, with an average interest rate of 6.68%. The VA share fell from 12.2% to 11.7%, and the USDA share remained unchanged at 0.4%.