Mortgage Applications Drop to Lowest Level Since 1995 — Should Sellers Worry?

Inviting her client.
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If U.S. home sellers ever had cause to fret over the state of the housing market, now is as good a time as any. Mortgage purchase applications are at their lowest level since 1995 amid a recent rise in mortgage rates, while home sales continue their downward descent — just ahead of what is usually a busy buying season.

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Mortgage loan application volume for the week ending Feb. 17, 2023, fell 13.3% from the previous week on a seasonally adjusted basis, according to the latest survey from the Mortgage Banker’s Association. The seasonally adjusted purchase index decreased 18% to its lowest level since 1995.

Meanwhile, mortgage rates rose across all loan types for the week, with the 30-year fixed rate climbing 23 basis points to 6.62% – its highest since November 2022.

“This time of the year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected,” Joel Kan, the MBA’s vice president and deputy chief economist, stated in a press release. “The increase in mortgage rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates.”

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Those words will not bring much joy to Americans looking to sell their homes right now, especially given the grim news on home sales. Existing-home sales in January declined for the 12th straight month to a seasonally adjusted annual rate of 4 million, according to a Feb. 20 report by the National Association of Realtors. That’s down 36.9% from the previous year and 0.7% from December 2022.

“Home sales are bottoming out,” NAR chief economist Lawrence Yun said in a statement. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”

In addition to a slowdown in sales and mortgage activity, sellers face another potential worry regarding the amount of inventory on the market. Total housing inventory at the end of January stood at 980,000 units, up 2.1% from December and 15.3% from a year earlier. Unsold inventory sits at a 2.9-month supply at the current sales pace, unchanged from December but up from 1.6 months in January 2022.

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“Inventory remains low, but buyers are beginning to have better negotiating power,” Yun added. “Homes sitting on the market for more than 60 days can be purchased for around 10% less than the original list price.”

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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