The numbers: Mortgage rates fell over the latest week, but demand for mortgages fell to multidecade lows as U.S. home buyers stayed put.
Demand for mortgages fell to the lowest level since December 1996, while purchase applications fell to a 28-year low, despite rates falling 10 basis points over the last week. The 30-year was averaging at 7.21%.
Demand for both purchases and refinancing both fell, pushing down the market composite index, a measure of mortgage application volume, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index fell 2.9% to 183.6 for the week ending September 1 from a week earlier. A year ago, the index stood at 258.1.
Key details: Applications for home purchases and refinances fell, as buyers and homeowners pulled back.
Buyers are choosing to wait on the sidelines. The purchase index — which measures mortgage applications for the purchase of a home — fell 2.1% from last week.
Few homeowners found it a good time to refinance. The refinance index fell 4.7%.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 7.21% for the week ending September 1, down from 7.31% the week before, the MBA said.
The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 7.21%, down from 7.28% the previous week.
The average rate for a 30-year mortgage backed by the Federal Housing Administration fell to 7.03% from 7.1%.
The 15-year fell to 6.66% from 6.72% from the previous week.
The rate for adjustable-rate mortgages fell to 6.33% from last week’s 6.48%.
The big picture: Home buyers are not only dealing with high mortgage rates but low inventory, which could be one reason why purchase applications fell at the end of August.
High rates and home prices have paved the way for housing affordability to drop to the lowest level since 1984, according to a separate report from Black Knight.
High rates also erode a home buyer’s budget. A recent Redfin report noted that a jump from a 30-year mortgage rate to 7.4% in August this year versus a 5.5% rate last year translates to a potential buyer’s budget shrinking to $429,000 from $500,000.
What the MBA said: “The 30-year fixed mortgage rate decreased to 7.21% last week, but rates remained more than a full percentage point higher than a year ago, despite mixed data on the health of the economy and signs of a cooling job market,” Joel Kan, deputy chief economist and vice president at the MBA, said in a statement.
Market reaction: The yield on the 10-year Treasury note BX:TMUBMUSD10Y was above 4.2% in early morning trading Wednesday.
