Homebuyers, Builders Hold Off as Mortgage Rates Rise

What Wednesday’s Economic Reports Tell Us

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A measure of mortgage applications fell to its lowest point since early in the pandemic and new home starts fell again in April, reports showed Wednesday.

Here’s a quick look at the most significant economic indicators of the day and what they tell us.

Mortgage Applications 

  • The recent spike in mortgage rates is definitely putting off potential homebuyers. A weekly index measuring the volume of mortgage applications decreased 12% last week, dropping to the lowest level since the early days of the pandemic, according to data from the Mortgage Bankers Association. 
  • Volatility in the stock market and concerns about the economy may also be giving would-be buyers pause, said Joel Kan, the Mortgage Bankers Association’s associate vice president of economic and industry forecasting. 
  • ​​The average rate for a 30-year fixed mortgage fell to 5.49% from 5.53% the week prior, according to MBA’s measure. That’s more than 2 percentage points higher than just a year ago, and still close to the highest level seen since 2009. 

New Residential Home Construction

  • Measures of new home construction in the U.S. fell in April, with builders breaking ground on 7.3% fewer single-family homes (the second monthly decline). The volume of building permits dropped 3.2% (4.6% for single-family homes), according to data from the Census Bureau. 
  • The recent surge in mortgage rates has made buying a home less appealing, and that’s translating into less interest in building too, economists said. Shortages of materials and workers are also still hindering construction, and the backlog of single-family homes authorized but not started continued to rise, reaching its highest point since 2006.
  • While economists expect the high interest rates to continue to dampen construction activity, it’s not likely to dip too low because of the dearth of homes on the market and the big backlog. 

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Mortgage Bankers Association. “Mortgage Applications Decrease in Latest MBA Weekly Survey.”

  2. Census Bureau. “Monthly New Residential Construction, April 2022.”

  3. Wells Fargo. “Housing Starts Inch Down in April.”

  4. Census Bureau. “Time Series/ Trend Charts - Housing Units Authorized but Not Started.”

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