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The number of U.S. mortgage applications shrank by 6.5 percent during the week ending 3 June, falling for the fourth consecutive week and reaching the smallest volume since 2002, the Mortgage Bankers Association (MBA) said.
Applications for new purchases fell 6 percent for the week; applications to refinance were down 7 percent.
Interest rates have risen through the year, first crimping the refinance market. Now purchases are being hit as well, the MBA noted.
During the week ending 2 June, the average rate on the 30-year, fixed-rate mortgage was 5.09 percent, according to the Federal Home Loan Mortgage Corporation.
The rate began this year at 3.22 percent, the agency said, and stood at 5.78 percent on 13 June, according to Bankrate.com.
TREND FORECAST: With interest rates rising and the economy wobbling, mortgage bankers will be more selective in who they lend to. As a result, even fewer households will be able to get loans than previously.
Higher rates and fewer buyers will soften home prices, but not greatly: the supply of houses for sale will remain small enough, and demand will remain strong enough, to keep prices aloft.
However, should war break out in the Middle East and oil prices spike to above $150 per barrel, economies and equities will crash. This in turn will drive down housing prices 10 percent or more… depending on the extent of the military conflict.