Total mortgage applications recently fell 13.1 percent from the week prior, to hit the lowest level since December 2019.
According to the Mortgage Bankers Association’s weekly survey, refinance applications also fell 15 percent, and were 56 percent lower than one year ago.
Joel Kan, MBA’s associate vice president of economic and industry forecasting, said the drop is due to higher mortgage rates, which have quickly “shut off” refinances.
Mortgage rates reached 4.06 percent for 30-year fixed loans, which is almost a full percentage point higher than a year ago.
Kan said refinance activity has been down in six of the first seven weeks of the year, with conventional refinances in particular dropping 17 percent.
Meanwhile, average loan size did not increase, but is still close to the survey’s record high that was recorded for the week of Feb. 11.
The average loan size currently is at $450,200, while the record high is $453,000.
Purchase applications were down 10 percent weekly, and 6 percent lower than a year ago.
Home demand is hanging on for longer than expected despite rising rates, as buyers rush to purchase before there’s an even greater increase.
Most experts anticipate that demand will continue to fall as rates rise, but price growth will also slow in response.
Zillow, on the other hand, believes the home price growth rate will reach 21.6 percent by May.
This rate would be the highest since price growth data first was calculated in the 1980s.
Zillow researchers are saying the severe lack of inventory will create sustained, scorching demand that continues to push up home prices.
Other experts disagree with these figures. For example, Fannie Mae still predicts 7.6 percent growth.
The wide range of predictions is a result of mortgage rates, experts say. Many are looking to the Federal Reserve’s upcoming interest rate hikes to determine what will happen next.
Some market experts are confident increasing mortgage rates will eventually break demand, while others think there’s still too much demand for this to even make a difference.
The bottom line, experts say, boils down to a borrower’s personal financial situation and location.
While these purchase and refinance figures can be helpful in determining overall market patterns, a borrower’s decisions should be based on local market information and their financial health, such as credit score, down payment amount, and high-interest debts.
Total applications for both FHA and VA loans increased slightly, indicating that opportunities remain for borrowers outside of conventional purchases and refinances.