- According to economists, US mortgage applications are in a “meltdown” state, increasing the threat to home prices.
- The Mortgage Bankers Association’s application index fell again last week, dropping dramatically since January.
- Pantheon Macroeconomics said the likelihood of a “short-term apparent fall” in home prices is increasing.
According to consultancy Pantheon Macroenomics, US mortgage applications are in a “meltdown” state due to rising borrowing costs and increasing threats to home prices.
Mortgage Bankers Association Said on wednesday In the week leading up to June 3, new purchase applications fell again and continued to decline for a month.
According to Bloomberg data, the MBA index, which measures new purchase offers, fell from 224.1 a week ago to 208.2. It has fallen by more than a third since January when it was over 310.
“In the three months leading up to May, applications have declined at an annual rate of 52% compared to the past three months,” Pantheon Chief Economist Ian Shepherdson said in a memo earlier this week.
“Meltdown, in other words”
Now that interest rates are rising, Americans are applying for far fewer mortgages
It tries to combat the surge in inflation. Meanwhile, home prices have continued to rise, and new homes are not affordable for many.
At the beginning of May, fixed-rate mortgages with an average of 30 years reached a 13-year high of 5.53%. Since then, interest rates have fallen to 5.4% as bond yields to shape mortgages have fallen slightly.
Shepherdson said interest rates have been set to rise further, and given that they pose a risk to US home prices, the sharp decline in applications is likely to continue.
The Pantheon Macro does not anticipate a significant price drop, but Shepherdson said, “mainly due to the surge in new home inventories, there is a high possibility of a clear short-term price drop.”
He said homebuilders must sell their homes to continue and are therefore likely to lower prices. As a result, those who want to sell their home will move faster, have more properties for sale, and have higher prices.