M Mortgage

US Mortgage Purchase Applications Fell 26.5% Over the Past Eighteen Weeks, Hitting Lowest Since 1995

02 November, 2023

The recent increase in mortgage rates has caused a decline in American homebuyers’ enthusiasm, which has resulted in a substantial drop in mortgage purchase applications over the past eighteen weeks. Wednesday’s data indicated that this decrease has led another lowest levels recorded since February 1995.

According to the Mortgage Bankers Association (MBA), for the week ending October 27, 2023, mortgage purchase applications decreased (third straight drop) by 1.4% on a seasonally adjusted basis from the previous week (v -2.2% prior). The index was down 26.5% over the past eighteen weeks. It reached the lowest level since February 1995.

The decrease in purchase activity can be attributed to various factors, notably the soaring mortgage rates. “The 30-year fixed rate dipped slightly to 7.86 percent but remained close to 23-year highs and has been above the 7-percent level since early August 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. 

Separately, on Wednesday, Bankrate.com data showed 30-year mortgage rates have remained above 8% since October 24, 2023 (close to the highest since June 2000). Mortgage rates tend to loosely track the yield on the 30-year U.S. Treasury

This situation is expected to have a significant effect on closed sales from October to December. In September, existing home sales already dropped to the lowest point since 2010, in line with my forecast. According to data from the National Association of Realtors, contract closings declined by 2% compared to the previous month, reaching an annualized pace of 3.96 million.

It comes as other housing data point to weakness. In October, the sentiment among US homebuilders reached its lowest point in nine months. The National Association of Home Builders/Wells Fargo index dropped for the third straight month. Measures evaluating both present and anticipated sales, along with a gauge of potential buyer traffic, also hit their lowest levels since the beginning of the year.