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After briefly rallying in the face of rising interest rates earlier this spring, the number of prospective homebuyers seeking home loans dwindled over the course of May according to a new report from the Mortgage Bankers Association.
The seven days ending May 27 saw the number of applications for purchase loans nationwide fall 3.1 percent from the prior week to end 13.2 percent down from the end of April.
This was despite several successive weeks where the average interest on a 30-year fixed-rate mortgage fell slightly from its spring peak of 5.3 percent, according to Freddie Mac. The seven days ending May 26 saw the average drop to 5.1 percent.
“Mortgage rates fell for the fourth time in five weeks, as concerns of weaker economic growth and the recent stock market sell-off drove Treasury yields lower. Mortgage applications decreased to its lowest level since December 2018, as the purchase market continues to struggle with supply and affordability challenges,” MBA Associate Vice President of Economic and Industry Forecasting Joel Kan said in a statement.
Kan put the blame squarely on the heights to which home prices have been pushed by record low levels of homes for sale.
“Purchase applications last week were 14 percent lower than last year, with more activity in the larger loan sizes,” he said in a statement. “Demand is high at the upper end of the market, and supply and affordability challenges are not as detrimental to these borrowers as they are to first-time buyers.”
Housing market watchers have hoped rising interest rates will spur some buyers to step out of the market, reducing upward pressure on home prices and allowing more inventory to build up.
