A key measure of home-purchase applications fell again last week as consumer demand cooled in the face of higher mortgage rates.
The Mortgage Bankers Association’s (MBA) index of mortgage applications dropped 1.4%, according to new data published Wednesday.
"Mortgage rates declined last week from a recent high, but total application activity slipped for the fourth straight week," said Joel Kan, MBA's deputy chief economist. "Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market."
Demand for refinancing also continued to fall last week, sliding another 1%, according to the survey. Compared with the same time last year, refinance applications are down 42%.
"There continues to be very little rate incentive for refinance borrowers," Kan said.
The interest rate-sensitive housing market has cooled rapidly in the wake of the Federal Reserve's aggressive tightening campaign.
Policymakers already lifted the benchmark federal funds rate 10 consecutive times as they try to crush stubborn inflation and cool the economy.
For months, higher mortgage rates have dampened consumer demand and brought down home prices. As rates have slowly fallen from a peak of 7%, the housing market has shown early signs of stirring back to life.
However, the return to lower mortgage rates has not been smooth.
Rates have moved significantly higher over the past month, according to Mortgage News Daily, with the average rate on the popular 30-year mortgage hovering around 6.89% – near the highest level in two months.
Those rates remain significantly higher than just one year ago, when rates hovered around 5%.
Limited inventory has also bolstered demand and prices this month.
A recent report from Realtor.com showed that the number of available homes on the market in March is down more than 50% from the typical amount before the pandemic began.