Mortgage rates fell slightly last week, but the damage has already been done to housing affordability. The Mortgage Bankers Association's index shows that mortgage application volume fell for the week.
The number of mortgage applications to purchase a home was 15% lower than a year ago. Since the third week in April, there has been a drop in homebuyer demand. Home prices are up more than 20% from a year ago, and mortgage rates have risen over 2 full percentage points since the start of the year.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 5.49% from 5.53%, with points increasing to 0.74 from 0.73 for loans with a 20% down payment.
Consumers feel particularly flush from inflation.
Uncertainty about the near-term economic outlook, as well as recent stock market volatility, may be causing some households to delay their home search.
The number of applications to refi a home loan fell another 10% week to week. The demand for loans was lower last week than it was a year ago. Two years of record-low interest rates caused a refinance boom which has now ended. A small group of borrowers can now benefit from a refinance.
The share of total applications with a mortgage remained high despite a slight drop from the week before. At the beginning of the year, it was around 3%. Fixed rates are available for up to 10 years.
After strong retail sales data and comments from Federal Reserve Chairman Powell who said the Fed would not hesitate to continue boosting interest rates until inflation came down, mortgage rates moved higher again Tuesday.
A report out Tuesday from the nation's homebuilders concurs with the weekly drop in homebuyer mortgage demand. The National Association of Home Builders reported a drop in buyer traffic and current sales conditions. The builder sentiment dropped to its lowest level in nearly two years.
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