Mortgage applications plummeted to their lowest level in three years as rates continued to edge higher, hitting home buyers and refinancers.
Mortgage applications decreased 13.1% in the week ending Feb. 18, the lowest level since December 2019, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Application Survey. The survey, which measures mortgage loan application volume, found refinancing activity decreased 15% on a weekly basis and was 56% lower than the same period one year prior.
Mortgage applications drop to lowest level in over 2 years https://t.co/3C7PTvRYNN
— CNBC (@CNBC) February 23, 2022
“Mortgage applications dropped to their lowest level since December 2019 last week, as mortgage rates continued to inch higher,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in the report. “Higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022.”
“Purchase applications, already constrained by elevated sales prices and tight inventory, have also been impacted by these higher rates and declined for the third straight week,” Kan said. “While the average loan size did not increase this week, it remained close to the survey’s record high.”
Meanwhile, U.S. home prices soared to a record high in 2021, fueled by surging demand, low mortgage rates and depleted inventory. Home prices grew 18.8% in 2021, according to the S&P CoreLogic Case-Schiller U.S. National Home Price Index, marking the most significant increase since the metric was created 34 years ago. (RELATED: Consumer Spending Surged In January As Inflation Reached Near 40-Year High)
“Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers,” Lawrence Yu, chief economist at the National Association of Realtors, said in a report.
Ultra-low inventory continued into 2022, with the number of available homes for sale dipping to a new low of 860,000, according to the National Association of Realtors. Home sales grew at an annual rate of 6.5 million in January, a 6.5% increase from December.
The surging home prices are expected to decelerate throughout 2022 as mortgage rates continue to increase.
“The surge in mortgage rates is likely to take a bite out of the demand for housing, mostly among first-time buyers and those with limited budget,” Selma Hepp, deputy chief economist at CoreLogic told the Wall Street Journal.
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