US Mortgage Applications Drop as Home Prices Soar

By Bryan Jung
Bryan Jung
Bryan Jung
Bryan S. Jung is a native and resident of New York City with a background in politics and the legal industry. He graduated from Binghamton University.
May 25, 2022 Updated: May 25, 2022

“The 30-year fixed rate declined for the second straight week to 5.46 percent but remains well above what borrowers were used to over the past two years,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

Refinancing decreased 4 percent from the previous week, 75 percent lower than the same week a year ago.

The refinance share of mortgage activity fell to 32.3 percent of total applications from 33.0 percent the previous week.

The adjustable-rate mortgage share of activity decreased to 9.4 percent of total applications.

“Most refinance borrowers continue to remain on the sidelines as a result, and refinance applications have fallen in nine of the past 10 weeks.”

“Compared to January 2022, refinance activity is down 66 percent,” he said, with only the Purchase Index doing better, which increased 0.2 percent from one week earlier.

The unadjusted Purchase Index decreased by 1 percent compared with the previous week and was 16 percent lower than the same week in 2021.

New home sales in the United States saw a sudden decline in April, with a drop of 16.6 percent from March to April, well below monthly forecasts, as rising mortgage rates, rising construction costs, supply chain issues, and high home prices hit the industry, deterring buyers from their search.

Sales of single-family homes dropped significantly to the seasonally adjusted annual rate of 591,000 units last month, the lowest level since the pandemic two years ago.

Last month’s decline marked the fourth straight month of tumbling new home sales, the longest streak since 2010.

The housing market is extremely sensitive to interest rates compared to the rest of the economy, with home sales which are recorded at the signing of a contract, acting as a leading indicator for the industry.

The U.S. Census Bureau’s latest data shows that the pace of new home sales fell by 16.6 percent in April from March, at a seasonally adjusted rate of 591,000.

“Higher mortgage rates are also impacting purchase market conditions, as the purchase index remained close to lows last seen in the spring of 2020 when a significant portion of activity was put on hold due to the onset of the pandemic,” concluded Kan, who explained that “higher rates, low inventory, and high prices are keeping prospective buyers out of the market.”

Meanwhile, the May 25 Commerce Department report showed that around 9.0 months worth of new home inventory was on the market in April, up from 6.9 months in March.

Bryan Jung
Bryan S. Jung is a native and resident of New York City with a background in politics and the legal industry. He graduated from Binghamton University.