US Mortgage Purchase Applications Fell 16.7% Over the Past Ten Weeks, Hitting Lowest Since 1995

US homebuyers’ enthusiasm has beeen dampened by the spike of mortgage rates as suggested by the sharp decline of mortgage purchase applications over the past ten weeks. They reached the lowest level since April 1995, according to data out Wednesday.

According to the Mortgage Bankers Association (MBA), for the week ending September 1, 2023, mortgage purchase applications decreased by -2.1% on a seasonally adjusted basis from the previous week (v +2.0% prior). The index was down 16.7% over the past ten weeks. It reached the lowest level April 1995 (when the US population was ~70 million lower).

The decrease in purchase activity can be attributed to various factors, notably including limited housing inventory and the soaring mortgage rates. On Wednesday, Bankrate.com data showed 30-year mortgage rates hit the highest level of the year which was also the highest since September 2000. This situation is expected to have a significant effect on closed sales from August to October. Contract closings decreased 2.2% in July, from a month earlier to a 4.07 million annualized pace, National Association of Realtors data showed last month. The recent spike of 30-year mortgage rates and the crash of mortgage purchase applications imply that existing home sales will fall further in the coming months, reaching a 13-year low.