Mortgage Applications Fall 6 Weeks in a Row -- Good News for Buyers or Not?

by Maurie Backman | Updated July 19, 2021 - First published on April 16, 2021

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Fewer people have been applying for mortgages. Will that make it easier to buy a home?

For much of 2020, mortgage lenders were loaded with applications from buyers seeking home loans. But mortgage applications seem to be slowing down. In fact, the week ending April 9 marked the sixth consecutive week of falling application volume.

At first glance, fewer mortgage applications could signal there's less competition on the homebuying front. But when we dig deeper, it's clear potential buyers won't necessarily get to enjoy a more open market anytime soon.

Inventory remains sluggish

One big reason mortgage applications are down? There aren't enough homes to buy. Housing inventory levels have been extremely low since the start of the year, which largely explains the decrease in mortgage applications.

Of course, mortgage rates have also risen quite a bit since the year began. That could be turning some buyers off, though today's rates are still very competitive on a historical basis. It's more likely a major lack of inventory is the primary driver of slower mortgage activity.

How to navigate today's market

Those currently looking to buy a home have a major challenge to overcome. Not only has limited housing inventory helped drive home prices up, but it also means many homes are subject to bidding wars, which are notorious for driving prices up even more.

As a buyer, you may be discouraged by the lack of selection in your target neighborhood coupled with an intense amount of competition. But there are a few things you can do to help yourself stand out and entice sellers to work with you.

First, get pre-approved for a mortgage. Pre-approval doesn't guarantee you a home loan, but it does show the seller you're a serious buyer who's already got your finances vetted.

Next, be very flexible with your closing. If a seller wants to close in three months and you can swing it, say yes.

Finally, try appealing to sellers personally. When you make an offer on a home, include a note or letter explaining why you want to buy it. Tell the seller how you can picture your kids running around in the yard or playing hide-and-seek in the expansive finished basement. You never know what might prompt a seller to choose your offer over a comparable one.

Things might start to look up for home buyers

The fact that mortgage applications have declined in recent weeks could be a byproduct of rising interest rates. But more likely, a glaring lack of inventory is what's keeping new applicants at bay. Inventory, however, may improve in the coming months as the economy (hopefully) continues to add jobs and vaccines (hopefully) make coronavirus less of a threat to public health. Plus, spring has traditionally been a strong period for new home listings.

All of these factors could combine to make for a more buyer-friendly market. And at that point, we may see mortgage applications pick back up, even if rates don't drop back down.

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