June Mortgage Applications Were Down Almost 24% Year Over Year

Mortgage applications fell last month. Is the housing market finally cooling off?

The housing market has been hot since 2020, due largely to the fact that mortgage rates have been really low for a solid year and counting. In fact, buyers have been so desperate to take advantage of low mortgage rates that they've been paying record-high prices for homes.

But now, mortgage activity seems to be slowing down. In June, applications to purchase a new home decreased 3% from May, reports the Mortgage Bankers Association. And while that month-to-month drop isn't so extreme, what's more notable is the fact that mortgage applications fell 23.8% from the previous June.

Of course, part of the reason why applications are down could stem from the fact that housing inventory is down, and if there are few homes to buy, there won't be as many mortgages to apply for. But a downtick in mortgage activity could also be stemming from the fact that buyers have finally had it with overpaying for homes. And if that's the case, we may see mortgage activity continue to decline as 2021 chugs along.

Should you bail on your home search?

If you've been in the market for a new home for quite some time and have been unsuccessful to date, you may want to consider putting your search on hold and picking it up again later in the year, or even in early 2022. Right now, there's such a glaring lack of housing inventory that finding a home that meets your needs may prove quite difficult.

Worse yet, even if you do manage to find a suitable home, there's a good chance that you'll unfortunately lose out on it to a higher bidder. Bidding wars have been popping up all over the housing market, and they're part of the reason why home prices have soared.

Of course, you may be motivated to buy a home sooner rather than later to not miss out on today's attractive mortgage rates. But mortgage rates are likely to stay low for quite some time.

This doesn't mean they won't rise at all in 2022. But even if they go up a little bit, that would still put them at quite an affordable level, historically speaking. As such, you really shouldn't pressure yourself to buy a home this year specifically -- not when inventory is sitting at such a low.

When will more homes hit the housing market?

Home prices are likely to stay high as long as inventory remains low. So when will inventory pick up? It's hard to say. Housing inventory did rise modestly in May compared to April, but levels were still down 31.2% from the previous May.

At this stage of the game, it's hard to pinpoint why sellers are hesitant to list their homes. Earlier in the year, it was easy to point to coronavirus concerns as a reason to hold off on selling (namely, to avoid an influx of house hunters before vaccines were widely available). But at this point, with so many people being vaccinated or having the choice to be vaccinated, that may not be such a big factor. Economic concerns could be keeping some sellers from listing their homes, but those, too, shouldn't be as substantial given the way the jobless rate has come down a lot from earlier in the year.

Ultimately, it's hard to say when housing inventory will pick up. But until it does, we may continue to see a decline in mortgage applications.