The numbers: Housing market activity continues to slow, as declines in in purchase and refinance applications to push the Market Composite Index, a measure of mortgage loan application volume, lower, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index fell 2.3% to 273.3 in the week ending August 12. One year ago, the index stood at 725.4.
Key details: The Refinance Index dropped by 5% and was down 82% compared to a year ago.
The Purchase Index—which measures mortgage applications for the purchase of a home—fell by 1% from the previous week.
The big picture: Fears of a recession and higher mortgage rates have cooled demand considerably.
Mortgage application activity has dropped to the “lowest level since 2000,” Joel Kan, associate vice president of economic and industry forecasting at MBA, said in a statement.
The fall in purchase apps falling is due to demand “rapidly drying up,” higher mortgage rates, and fears of a recession, Kan added.
Some buyers have become more non-committal, backing out of deals when they see any potential issues with their home, one brokerage said. Previously, the same homes would have been subject to bidding wars.
Softening sales has left home builders feeling gloomy about the U.S. housing sector.
But given how rates are moving, the situation could change, the MBA said.
“If home price growth slows more significantly and mortgage rates move lower, we might see some purchase activity return later in the year,” Kan added.
The 30-year fixed-rate mortgage averaged at 5.45% for the week ending August 12, down from 5.47% the week before, the MBA said.
The MBA also noted a drop in adjustable-rate mortgages, which comprise just 7% of total applications. The average rate on the ARM fell from 4.6% to 4.43%.
Market reaction: The yield on the 10-year Treasury note rose above 2.86% before the market opened.