According to the Mortgage Bankers Association’s seasonally adjusted index, the total volume of mortgage applications was 52.7% lower than last week. Sharply rising interest rates are decimating refinance volume, and those rates, along with sky-high home prices and a shortage of houses for sale, are hitting demand from potential buyers.
The average fixed-rate 30-year mortgage rate was 5.65%, up from 5.40%. Points increased to 0.71, including the origination fee, for loans with a 20% downpayment. They rose even more this week with the average rate reaching 6.28% Tuesday according to Mortgage News Daily.
Joel Kan, an MBA economist said that mortgage rates were affected by higher Treasury yields due to higher inflation than anticipated and anticipation that the Federal Reserve would need to raise rates quickly.
The weekly mortgage application volume increased slightly in comparison to the holiday-adjusted week before. Refinance demand increased by 4% over the week, but was 76% lower than that of the same week a year ago.
However, mortgage applications from homebuyers rose 8% in the past week, but were 16% lower than one year ago.
"Despite the increase in rates, application activity rebounded following the Memorial Day holiday week but remained 0.29 percent below pre-holiday levels," added Kan.
In an increasing interest rate environment, the housing market is reeling. After two years of record-low mortgage rates, which were fueled in part by Federal Reserve's Covid panademic-induced purchases, of mortgage-backed bond bonds, the Federal Reserve's Covid pandemic, home prices have risen to an alarming level and affordability has dropped to the bottom. Redfin (a major brokerage in real estate) and Compass (a major brokerage in the field of real estate) announced layoffs on Tuesday.
"Mortgage rate increased faster than at any time in history. Redfin's future success could hinge on the fact that we may see fewer home sales in years than months. Redfin CEO Glenn Kelman posted that $8 falling from $97 to $8 does not put a company through hell.