Low housing inventory leads to drop in mortgage demand

The Mortgage Bankers Association reported a 4.1% drop in its index of mortgage applications last week, marking the first decline in a month. This is due to a lack of supply in the housing market, with new listings down 20% in March compared with last year, according to The total inventory of homes remains about half of what it was in March 2019, before the COVID-19 pandemic began. The interest rate-sensitive housing market has cooled rapidly in the wake of the Federal Reserve's tightening campaign, which has dampened consumer demand and brought down home prices. However, as rates have slowly fallen from a peak of 7%, the housing market has shown early signs of stirring back to life. Median home prices climbed 0.16% in February from a month earlier, compared with a 3.4% decline in January, marking the strongest one-month gain since May of last year. Prices are expected to climb higher as rates continue to drop and supply remains constrained. "The unfortunate reality is that the scarce supply of inventory that’s the source of so much market gridlock isn’t getting any better," said Andy Walden, Black Knight’s vice president of enterprise research. "Without a significant shift in interest rates, home prices or household income, this is a self-fulfilling dynamic that is quite likely to continue for some time."


More from Press Rundown