The sign of the house for sale is painted in the Alhambra, California, on May 4, 2022.

Frederick J. Brown | AFP | Getty Images

Mortgage rates actually fell slightly last week, but the damage has already been done by housing affordability. According to the seasonally adjusted index of the Association of Mortgage Bankers, the demand for refinancing and loans for purchase decreased, which reduced the total number of applications for mortgage loans by 11% per week.

Mortgage applications for home purchases fell 12% from week to week and were 15% lower compared to the same week a year ago. This was the first weekly drop in demand from home buyers since the third week of April. Since the beginning of the year, mortgage rates have risen by more than 2 percentage points and housing prices have risen by more than 20% compared to last year.

The average contractual interest rate on a fixed-rate mortgage for 30 years with corresponding loan balances ($ 647,200 or less) fell to 5.49% from 5.53%, and points rose to 0.74 from 0.73, including a commission for clearance) for loans with a reduction of 20%. payment.

Inflation also doesn’t help consumers feel particularly flushed.

“The general uncertainty about the near-term economic outlook, as well as the recent volatility of the stock market, may lead some households to postpone their housing search,” said Joel Kahn, an MBA economist.

Applications for housing loan refinancing continued to fail, falling another 10% from week to week. Demand for refinancing was 76% lower than in the same week a year ago. Two years of record low interest rates during the Covid pandemic caused a refinancing boom that has now declined. There is just a very small pool of borrowers who can now benefit from refinancing.

Although the share of rate-adjustable mortgages in total applications remained high at 10.5%. Earlier this year it was about 3%. ARMs offer lower interest rates and can be fixed for up to 10 years.

Mortgage rates rose again Tuesday after strong data on retail sales and comments by Federal Reserve Chairman Jerome Powell, who said the Fed would not hesitate to continue raising interest rates until inflation falls.

The weekly drop in mortgage demand for mortgages coincides with another report released Tuesday by domestic builders. They reported a significant drop in both customer traffic and current sales conditions, according to the National Association of Home Builders. Builders’ sentiment has dropped to its lowest level in almost two years.

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