Challenges Ahead as Home Sales, Mortgages, Refinances Continue to Fall

Mortgage applications fell for the third week in row, reaching their lowest level since 2000, the Mortgage Bankers Association reported Wednesday.

Meanwhile, the National Association of Realtors reported Wednesday that the streak of falling sales of existing homes stretched into a fifth month in June.

The MBA’s Market Composite Index of loan application volume for the week ending July 15 was 6.3% lower than the previous week after seasonal adjustments. Refinances, which have been slashed by rising interest rates, fell a further 4% for the week ending July 15, and were down 80% from a year earlier.

But the three-week falling streak also extended to mortgages for home buyers. Purchase applications fell a seasonally adjusted 7% from the previous week. That followed drops of 4% in each of the two previous weeks after a bare 0.1% gain for the week ending June 24.

“Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation and persistent affordability challenges are impacting buyer demand,” Joel Kan, the MBA’s assistant vice president of economic and industry forecasting, said.

“Similarly, with most mortgage rates more than two percentage points higher than a year ago, demand for refinances continues to plummet, with the MBA’s refinance index also falling to a 22-year low,” Kan said.

That followed the MBA’s report Tuesday that mortgage applications for new home purchases in June fell 12% compared to a year ago and an unadjusted 10% from May. It said new-home purchase applications were at the lowest level since April 2020.

“The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs,” Kan said.

The National Association of Realtors reported that existing single-family homes, townhomes, condominiums and co-ops were sold at a seasonally adjusted annual rate of 5.12 million in June, down 5.4% from May and down 14.2% from a year ago. Single-family homes sold at a SAAR of 4.57 million in June, down 4.8% from May and down 12.8% from a year ago.

The median existing-home price for all housing types in June was $416,000, up 13.4% from June 2021. The single-family home median was $423,300 in June, up 13.3% from a year ago.

“Falling housing affordability continues to take a toll on potential home buyers,” NAR Chief Economist Lawrence Yun said. “Both mortgage rates and home prices have risen too sharply in a short span of time.”

Total housing inventory was 1.26 million units at the end of June, up 9.6% from May and up 2.4% from a year ago. Unsold inventory sat at a 3.0-month supply at the current sales pace, up from 2.6 months in May and 2.5 months in June 2021.

However, properties typically remained on the market for just 14 days in June — the fewest since NAR began tracking it in May 2011. It was down from 16 days in May and 17 days in June 2021. Among homes sold in June, 80% were on the market for less than a month.

“Finally, there are more homes on the market,” Yun said. “Interestingly though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”