Mortgage Applications Hit Lowest Level Since 2019 as Home Prices Soar

The number of applications for mortgages dropped to its lowest level since 2019, according to new information from the Mortgage Bankers Association (MBA).

Total mortgage applications in the United States fell 13.1 percent last week to its lowest level since December of 2019 as home prices across the country dramatically increase. Refinancing applications dropped 15 percent.

"Higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022," said Joel Kan, MBA associate vice president of economic and industry forecasting.

However, Kan said that the amount of money listed on the mortgage applications has remained high and steady, despite the decrease in the amount of applications.

"While the average loan size did not increase this week, it remained close to the survey's record high," he said.

The decrease comes as home prices continue to rise. The average price of a house reportedly increased 18.8 percent in 2021, a stark uptick compared to 2020's 10.4 percent increase.

"Over the past two years, we've seen really low mortgage rates, which spiked the demand [for buying a new house] even more," Adam DeSanctis of the MBA told Newsweek on Wednesday. "A lot of the activity we've seen so far this year is that when the supply is still low, you can't have an increase in purchase applications if there are not enough homes out there."

"We have previously suggested that the strength in the U.S. housing market is being driven in part by a change in locational preferences as households react to the COVID pandemic," S&P DJI Managing Director Craig Lazzara told CNBC.

Despite these initial findings, he said that there is still more information that needs to be uncovered before the future of the housing market can be predicted.

"More data will be required to understand whether this demand surge simply represents an acceleration of purchases that would have occurred over the next several years rather than a more permanent secular change," Lazzara said. "In the short term, meanwhile, we should soon begin to see the impact of increasing mortgage rates on home prices."

The report also comes as mortgage companies are experiencing an increase in layoffs. According to Bloomberg, the number of mortgage brokers and other loaners has increased 50 percent since 2019. But with fewer people applying for mortgages, many companies have had to conduct layoffs because there are too many employees working on a product that is decreasing in demand.

Among the companies are Homepoint Capital, which laid off 10 percent of its workforce, and Better.com, which fired about 900 workers in December.

"I don't see us getting into a credit crisis problem like in 2008, though it may be happening around the edges," Bloomberg Intelligence mortgage analyst Eric Adelberg said. "It's more likely that the mortgage lending operation lays off people before they reach that far down the credit spectrum."

Newsweek reached out to the Mortgage Bankers Association but didn't hear back in time for publication.

Update 2/23/22, 12:20 p.m. ET: This story has been updated with comment from Adam DeSanctis.

House for sale
Mortgage applications in the U.S. fell 13.1 percent last week, according to the Mortgage Bankers Association. Tom Merton/Getty Images