US homebuyers’ enthusiasm has beeen dampened by the spike of mortgage rates as suggested by the sharp decline of mortgage purchase applications over the past seven weeks.
*This article was written by Christophe Barraud and was republished with consent.
According to the Mortgage Bankers Association (MBA), for the week ending August 11, 2023, mortgage purchase applications decreased by 0.3% on a seasonally adjusted basis from the previous week (v -2.7% prior). The index dropped for a fifth straight week and was down 12.2% over the past seven weeks. It reached the lowest level since February and the second-lowest level since 1995 (when the US population was 70 million lower).
The decrease in purchase activity can be attributed to various factors, notably including limited housing inventory and the soaring mortgage rates. On Thursday, Bankrate.com data showed 30-year mortgage rates hit the highest level since September 2000. This situation is expected to have a significant effect on closed sales from August to October. This could potentially lead to existing home sales reaching a 13-year low.
About the Author:
Christophe Barraud is Chief Economist and Strategist at Market Securities. He has been awarded by Bloomberg the title of Top Forecaster of the U.S. Economy (from 2012 to 2020 and in 2022), Eurozone Economy (from 2015 to 2019 and in 2022) and Chinese Economy (from 2017 to 2020). He also won the latest Forecaster of the Year contest organized by MarketWatch in 2020. Since 2021, he has been Adjunct Lecturer at ESCP in the MSc Finance, which has been ranked first worldwide in the 2023 Financial Times Masters in Finance ranking.