More Signs of Cooling Demand: Mortgage Applications to Purchase a Home Drop Below 2019 for First Time in Pandemic Housing Craziness amid Higher Interest Rates

And refinancing on mortgage applications has been cut by more than half in the past year.

By Wolf Richter for WOLF STREET.

The index of mortgage applications to buy a home in the week of April 9 fell 3.7% for the week and 20% in January of this year, falling below the same week in April 2019 for the first time, according to the Mortgage Bankers Association (the Big fall in February came during Snowmageddon; data via Investing.com):

Despite some click-bait stories in the media that then circulated endlessly on the insane social media about a ridiculous bidding war leading to a ridiculous amount being paid above the asking price, there have been signs that higher mortgage rates are skyrocketing and home prices are skyrocketing and other factors have dampened demand.

This has been seen in various metrics, including the high frequency metric of weekly mortgage applications and sharply declining monthly home sales.

“The third week in a row of declining buying activity is a sign that rising property prices and a tight supply are restricting home sales – especially in the lower price brackets,” said the MBA report.

The MBA’s mortgage refinancing index fell 5% in the week ending April 9, falling more than half from its March 2020 peak to its lowest level since February 2020.

“Many borrowers have either already refinanced at lower interest rates or are unwilling or unable to refinance at current interest rates,” the MBA said.

The mortgage refinancing index is still double what it was two years ago, in April 2019, when mortgage rates were around 4%:

That 4% range in April 2019 was unthinkably high at the end of last year when people were talking about mortgage rates below 2%. But now that the 4% mortgage rate becomes more conceivable.

In the week ended April 9, the average 30-year fixed rate on compliant mortgage loans fell to 3.27%, according to the MBA. They have been fluctuating in the same narrow range for six weeks now, after rising 40 basis points from 2.85% in mid-December (data via Investing.com):

Even this relatively small increase in mortgage rates from historically low levels last year to very low levels now – coupled with sky-high and still rising property prices – is beginning to dampen retail buyers’ demand for residential property.

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