Data from the Mortgage Bankers Association show negative developments surrounding mortgages.
The housing market continues to sour.
An index of mortgage loan applications volume slumped a seasonally-adjusted 6.3% last week from a week earlier, according to the Mortgage Bankers Association.
The MBA’s seasonally-adjusted index of mortgage applications for home purchases slid 3%. And the unadjusted index dropped 9% from a year ago.
The index of mortgage applications for refinancings lost 10% from a week earlier and 62% from a year ago.
“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” Joel Kan, an economist at the MBA, said in a statement.
As for mortgage rates, the 30-year fixed rate rose for the fourth consecutive week last week to 4.90%, up more than 1.5 percentage points from a year earlier, according to the MBA. High inflation is helping to push rates higher, with consumer prices soaring 7.9% in the 12 months through February, a 40-year high.
As for monetary policy, the Federal Reserve began raising interest rates with a 25-basis point hike last month to quell that inflation. And many economists and investors anticipate a 50-basis point increase next month.
To be sure, “the hot job market and rapid wage growth continue to support housing demand, despite the surge in rates and swift home-price appreciation,” Kan said. “However, insufficient for-sale inventory is restraining purchase activity.”
Unemployment stood at 3.6% in March, and average hourly earnings jumped 5.6% in the 12 months through March.
Meanwhile, “the elevated average purchase loan size and steeper 8% drop in FHA [Federal Housing Administration] purchase applications are both indicative of first-time buyers being disproportionately impacted by supply and affordability challenges,” Kan said.
A report from researchers on the Dallas Fed’s web site says they see evidence of a “brewing U.S. housing bubble.”
They note surging prices.
“There is growing concern that U.S. house prices are again becoming unhinged from fundamentals,” the researchers said.
Bloomberg columnist Conor Sen also sees trouble in the housing market. “If you want to know what stagflation looks like, check out the housing market,” he wrote.
“The conditions that existed during the 1970s — high inflation and stagnant output — are happening already in this segment of the U.S. economy.”
Homebuilders are hard at work trying to build new houses to meet demand, but “the number of homes actually being completed has been stagnant because of persistent supply chain problems,” Sen said.
