The Last Time the Housing Market Was This Slow, Bill Clinton Was President

The Last Time the Housing Market Was This Slow, Bill Clinton Was President

Roger Pettingell Sarasota Real Estate

Another week, another round of bad news for a U.S. housing market under pressure. 

For the fourth week in a row, mortgage applications, a measure of loan application volume, fell. New applications fell 1.8%, seasonally adjusted, from the previous week, according to the Mortgage Bankers Association

It’s the lowest level of activity the MBA has seen since February 2000, the last year of BIll Clinton’s presidency.

Meanwhile, the Refinance Index decreased 4% week to week and remained 83% lower than it was during the same week a year ago. 

Increased economic uncertainty and prevalent affordability challenges are dissuading households from entering the market, leading to declining purchase activity that is close to lows last seen at the onset of the pandemic,” said Joel Kan, MBA’s Associate VP of Economic and Industry Forecasting.

“With mortgage rates remaining well over 5 percent, refinance applications are now 83 percent below last year’s pace.”

The Federal Housing Administration share of total applications, subsidizes loans made to low and moderate-income borrowers decreased to 12.1% from 12.4% after rising the week before to 12.4% from 11.7%. 

The share of VA total applications remained unchanged at 10.6%. 

The average contract interest rate for a 30-year fixed mortgage for loan balances of $647,200 or less decreased to 5.74% from 5.82%.

The average contract interest rate for 15-year fixed mortgage rates increased to 4.95% from 4.88% week to week.

Pending, Existing Home Sales Fall

Pending home sales fell 8.6% in June nationwide as homes were 80% more expensive in June 2022 than they were in June 2019, according to the National Association of Realtors

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The Southern and Western U.S. saw some of the most robust relocation activity over the past two years, so if there is some fat to be trimmed it makes sense that it comes from those regions. 

Pending home sales in the West fell 15.9% from the previous month and 8.9% in the South. 

Meanwhile the Midwest saw the smallest drop off with a 3.8% fall followed by the Northeast which saw a 6.7% decline. 

“Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” said NAR Chief Economist Lawrence Yun. “There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize.”

Meanwhile, existing home sales fell for the fifth consecutive month to a seasonally adjusted annual rate 5.12 million. Sales were down 5.4% month-to-month and 14.2% from the year prior. 

Total housing inventory registered at 1.26 million units at the end of June, a nearly 10% increase from May and 2.4% rise from the previous year. 

“Falling housing affordability continues to take a toll on potential home buyers,” said NAR Chief Economist Lawrence Yun. “Both mortgage rates and home prices have risen too sharply in a short span of time.”

First time buyers were responsible for 30% of sales in June, up 3% from the previous month, but down slightly from 31% a year ago. 

All-cash sales represented 25% of transactions. 

Lack of Housing Affordability

Rising home prices aren’t helping matters as the median existing home price rose to a record of $416,000 in June, according to the National Association of Realtors.

The national median home price rose 13.4% year over year and rose from the revised May price of $408,400.

“A combination of higher prices and higher mortgage rates have clearly shifted the dynamics in the housing market,” Yun said, according to the Wall Street Journal. “People who want to buy are simply priced out given the affordability challenges.”


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