Rising interest rates continue to impact areas of the housing industry.
In the past week, mortgage rates increased to 5.66% from 5.55%.
Overall demand for mortgage applications fell by 0.8%, according to the weekly survey from the Mortgage Banker’s Association.
One area in particular that is seeing the impact of higher rates is refinancing.
The refinancing index declined 1% from the previous week.
“Mortgage rates moved higher over the course of last week as markets continued to re-assess the prospects for the economy and the path of monetary policy, with expectations for short-term rates to move and stay higher for longer,” said Mike Fratantoni, MBA senior vice president and chief economist. “With the 30-year fixed rate rising to the highest level since mid-June, application volumes for both purchase and refinance loans dropped.”
The purchase index took a hit as mortgage rates rise, also falling 1% from the prior week.
“Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand,” added Fratantoni. “There is no sign of a rebound in purchase applications yet, but the robust job market and an increase in housing inventories should lead to an eventual increase in purchase activity.”
Goldman Sachs economists warned that investors should brace for the housing downturn to get worse.
In a note to clients, Goldman strategists predicted that activity in the housing sector will slow sharply in the coming months, with price growth eventually falling to zero in the third quarter of next year.
But even as home sales decline, prices remain high because supply is still so limited.
The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.