In a startling downturn for the U.S. housing market, mortgage applications have sunk to their lowest level since December 1996. This decline comes despite a dip in mortgage rates across various loan types.
The data, released by the Mortgage Bankers Association (MBA) for the week ending Sept. 1, 2023, reveals a 2.9% decrease in mortgage applications from the previous week, as measured by the Market Composite Index.
The Refinance Index fell by 5% compared to the previous week and is down 30% year over year. The Purchase Index dropped 2% from the previous week on a seasonally adjusted basis and was 28% lower than the same week one year ago.
The 30-year fixed mortgage rate fell to 7.21% yet remains over a full percentage point higher than a year ago.
“Mortgage applications declined to the lowest level since December 1996, despite a drop in mortgage rates. Both purchase and refinance applications fell, with the purchase index hitting a 28-year low, as prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates,” said Joel Kan, MBA’s deputy chief economist. “The 30-year fixed mortgage rate decreased to 7.21% last week ... despite mixed data on the health of the economy and signs of a cooling job market. The refinance index dropped to its lowest level since January 2023, driven by a 6% decline in conventional refinances.”
The refinance share of total mortgage activity dipped marginally to 30% from 30.1% the previous week. The share of adjustable-rate mortgage (ARM) applications also fell to 6.7% of total applications.
Government-backed Loans
- The FHA share of total applications increased to 13.7%.
- The VA share fell to 11.3%.
- The USDA share of total applications grew slightly, rising to 0.6%.
Interest Rate Trends
- For 30-year fixed-rate mortgages with conforming loan balances, interest rates dropped to 7.21% from 7.31%.
- The rate for jumbo loans also fell to 7.21% from 7.28%.
- 30-year fixed-rate mortgages backed by the FHA saw rates decrease to 7.03% from 7.10%.
- 15-year fixed-rate mortgages rates declined to 6.66% from 6.72%.
- 5/1 ARMs saw rates fall to 6.33% from 6.48%.
This downward trend in mortgage applications may signal deeper issues for the housing market, despite the marginal fall in mortgage rates. The data paints a concerning picture for the real estate market, reflecting the hesitation of potential homebuyers and homeowners looking to refinance, who are clearly still wary of current economic conditions.
