The numbers: Mortgage applications fell 2% this week, as rates continue to inch higher, adding hundreds of dollars in costs to potential homebuyers.
Rates are a hop and a skip away from 7%, a trajectory which has deeply hit buyer demand.
That weighed down the market composite index, a measure of mortgage application volume, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index dropped 2% to 214.3 in the week ending October 7. A year ago, the index stood at 686.1.
The big picture: Mortgage application activity — which includes purchases and refinances — has dropped to the slowest pace since December 1999, the MBA said.
Economists are expecting home prices to decline, and in some markets, they’re already underway.
Mortgage rates are at the highest level since 2006.
“Mortgage rates increased across all product types,” said Mike Fratantoni, senior vice president and chief economist at the MBA in a statement. Adjustable-rate mortgages, for example, saw a 20 basis-point increase.
How that affects home buyers: With a $2,000 average monthly payment, a buyer would’ve been able to afford roughly a $500,000 home a year ago with the 30-year at 3.18% and with 20% down.
Now, with rates at 6.81%, a buyer would only be able to afford a home worth roughly $330,000.
Key details: The refinance index plunged by 1.8%, and was down 86% compared to a year ago.
The purchase index, which measures mortgage applications for the purchase of a home, fell by 2.1% from the previous week.
The adjustable-rate mortgage share of activity fell to 11.7% of total applications, but that’s still “quite high,” Fratantoni said.
The average contract rate for the 30-year mortgage for homes sold for $647,200 or less was 6.81% for the week ending October 7. That’s up from 6.75% the week before, the MBA said.
For homes selling for over $647,200, the average rate for the 30-year was 6.25%. The 15-year rose to 6.12%.
The rate for adjustable-rate mortgages rose to 5.56%.
Market reaction: The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose above 3.9% in early morning trading.
Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at [email protected]
