Mortgage Market in Freefall: Lowest Demand in 27 Years

In an eye-opening revelation, NBC has reported that the demand for mortgages has hit rock-bottom levels, the lowest we’ve seen in 27 years. Although mortgage rates have slightly retreated after a persistent upward climb, this minor reprieve hasn’t been enough to stimulate the stagnant mortgage market.

The Mortgage Bankers Association’s (MBA) adjusted index shows that the total mortgage application volume took a 2.9% dip compared to just the previous week. Average contract interest rates for a 30-year fixed-rate mortgage decreased from 7.31% to 7.21%. Even this drop in rates didn’t spur a revival, and mortgage applications plummeted to their lowest since December 1996, according to Joel Kan, an economist with the MBA.

But wait, there’s more to this narrative. These rates are still a full percentage point higher than they were a year ago. This stubbornly high rate comes even as we see mixed economic signals and indications of a job market losing steam. So, what exactly is going on here?

NBC also highlighted that applications for refinancing home loans slid downwards by a hefty 5% week-over-week. To put this in perspective, the number of applications is now a staggering 30% lower than what it was in 2022.

But it’s not just about refinancing; even the interest in new mortgages for home purchases has dwindled. It’s down by 2% from last week, and if you’re comparing it to the same time last year, the number is jaw-droppingly 28% lower. Joel Kan believes that prospective buyers are sticking to the sidelines, not just because of the high mortgage rates but also due to a severely limited housing inventory.

In summary, it’s like the perfect storm for low mortgage demand. High rates, a cooling job market, and sparse housing options have all conspired to send mortgage demand into a downward spiral. Despite the recent slight dip in mortgage rates, the overall picture is one of a mortgage market in dire straits, sitting at its lowest levels in nearly three decades.

In this climate, both lenders and prospective homeowners are left pondering what it will take to reignite the mortgage market. Is it lower rates, more housing options, or perhaps an uptick in the economy? Only time will tell.