Mortgages for New Homes Fell 27.4% in July

Mortgage volume dropped last month. Here's what buyers should know.

Today's housing market is a tough one to crack. Not only is real estate inventory extremely limited, making it more difficult for buyers to find suitable homes, but home prices are very inflated, which means many buyers can't afford to move forward with a home purchase.

It's not surprising, then, that mortgage application volume took a dive in July. Last month, mortgage applications for new home purchases fell 27.4% compared to a year prior, according to the Mortgage Bankers Association.

If you've been struggling to buy a home, you may be wondering if it pays to put your house hunting on pause. Clearly, it's a route other buyers are taking. And the reality is that there are pros and cons to waiting to buy.

The upside of waiting

Right now, homes are extremely expensive. The average loan size last month increased to $402,440 -- a new record. And a big reason is that sellers are getting away with charging more for their homes because there's not much competition.

If you opt to delay your home search, you may give the housing market enough time to open up. In the coming months, we could see more sellers list their homes, and once inventory picks up, home prices should start to come down. So waiting to buy a home could work to your benefit, financially speaking.

Also, if you wait for more inventory to become available, there's a greater chance you'll manage to find a home that actually checks off all the right boxes. If you buy when inventory is at a low, you may be forced to settle for a home that isn't perfect for you, or a home that comes with a long list of required repairs that eat into your savings.

The downside of waiting

While pausing your home search could work to your benefit, there are some drawbacks to consider. For one thing, we know what mortgage rates look like right now. We don't know what they'll look like six months from now. And while there's a strong chance they'll stay low well into 2022 and possibly even beyond, it's hard to say what rate you might get if you opt to buy a home in, say, January versus right now.

Also, while we'd like to hope that more inventory will hit the housing market later this year, we don't know whether that will happen. And if inventory holds steady, home prices may not come down much -- or at all.

Ultimately, there's no right or wrong answer here. If you decide to proceed with your home search, you might end up finding that rare home that works for your budget and checks off the right boxes on your wish list. Or you might continue to struggle to find a suitable place to buy. If you're going to keep looking for a home, just remember that there's a reason mortgage application volume declined last month -- and don't be surprised if your search doesn't end up being very productive.