The Mortgage Bankers Association of America (MBA) released its weekly mortgage applications survey yesterday for the week ending October 2. The report showed borrowing costs climbing higher for a seventh consecutive week, while demand continues to cool off. The report paints a relatively bleak picture for the US real estate market, where buyers are facing high mortgage rates and already elevated home prices.

US mortgage rates keep rising as the average 30-year fixed mortgage rate rose to 7.49% over the week ended October 2 from 7.30% the week before, its highest level in almost three years. The MBA said both US Treasury yields and lender spreads moved higher.
Meanwhile, mortgage applications fell for a fifth straight week. Total mortgage applications dropped by 4.2% from a week earlier. Refinance applications fell 8% and are 56% below last year’s level, while purchase applications slipped 2% and are 15% lower than a year ago.
The housing market is showing signs of cooling.  Existing home sales slipped by 2.0% in August to a 3.98 million annual pace, while inventory topped 1.6 million homes for the first time since 2019. The median home price was $429,100, up just 1.6% from a year ago.
The US Federal Reserve Board  raised interest rates in September and may do so again this year. Higher policy interest rates and rising US Treasury bond yields tend to push mortgage rates up, which could keep buyers on the sidelines and slow price growth further.

With mortgage rates roughly a percentage point higher than a year ago, affordability remains a major hurdle for US homebuyers. Few homeowners have an incentive to refinance, and further interest rate increases could extend the slowdown in housing activity. In Canada, the housing market has also shown signs of slowing in part due to weaker confidence amid economic, price and labour market uncertainty.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.