US Home-Purchase Applications Plunge as High Interest Rates Continue to Take a Toll

As the US housing market continues to face challenges, mortgage applications for home purchases experienced a significant decline last week, plunging by 4.4% in the week ending May 31, according to data released by the Mortgage Bankers Association (MBA) on Wednesday.

This marked the steepest drop since early April, coinciding with the Memorial Day holiday.

The persistent rise in borrowing costs has been a major factor contributing to the slowdown in home purchases.

The contract rate on a 30-year fixed mortgage edged up slightly by 2 basis points, reaching 7.07%, marking the ninth consecutive week above the 7% threshold.

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However, there was a glimmer of hope for those considering adjustable-rate mortgages, as the rate on a five-year adjustable mortgage fell by 27 basis points to 6.37%, the lowest level in two months.

The overall index of applications, encompassing both home purchases and refinancing, also experienced a decline, falling by 5.2% last week to 180.4, the lowest since February 23.

The refinancing measure, as reported by the MBA, saw a more pronounced drop of 6.8%.

Despite a stabilization in home listings, prospective buyers are increasingly hesitant to pursue purchases due to the combination of high asking prices and elevated borrowing costs.

This reluctance is further evidenced by the National Association of Realtors’ gauge of contract signings on home resales, which recently fell to its lowest level in four years.

The MBA survey, a long-standing and comprehensive assessment of the US residential mortgage market, has been conducted weekly since 1990.

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The data, gathered from responses provided by mortgage bankers, commercial banks, and thrifts, covers more than 75% of all retail residential mortgage applications in the country.