US Mortgage Activity Dips Again

Odeta Kushi, Deputy Chief Economist at First American, shares her perspective of the US housing market.

Applications for mortgages to buy a home or refinance both fell for a second week, marking a swift reversal of what had been a hopeful sign of a revival in the US housing market.

The Mortgage Bankers Association’s index of home-purchase applications declined 1.2% in the week ended Oct. 3, while a gauge of refinancing fell 7.7%. Both dropped back to levels seen in early September, when mortgage rates were on their way to a one-year low.

A metric that combines the two applications measures fell 4.7% after plummeting 12.7% in the prior week, marking the biggest back-to-back declines since April.

While the 30-year fixed contract rate fell slightly to 6.43%, the prior week’s jump was enough to spook prospective buyers and homeowners looking to lock in lower borrowing costs. That’s stopped an early recovery in housing activity and threatens to prolong the market’s years-long slumber.

Mortgage rates in the US resumed their downward path, falling for the first time in three weeks.

The average for 30-year, fixed loans was 6.3%, down from 6.34% last week and back to where it had landed on Sept. 25, data from Freddie Mac show.

Rates are significantly lower than they were at midyear. While that gives house hunters more buying power, they’ve been treading cautiously, held back by affordability challenges and concerns over where the economy might be headed.

The federal government shutdown adds another layer of stress for consumers. Roughly one in six Americans are delaying major purchases like a home or a car because of the shutdown, according to a survey commissioned by Redfin.

“A government shutdown doesn’t just stop paychecks for some federal employees — it shakes the financial confidence of Americans,” said Daryl Fairweather, chief economist for the brokerage. “People across the country are taking in the news and thinking, ‘We’ve faced inflation, tariffs, job losses, a volatile stock market and now a government shutdown. What’s next?’”

Economic uncertainty aside, it’s a tough time to buy a home. Prices remain stubbornly high, and mortgage rates are still double their pandemic-era lows. That’s keeping many first-time buyers on the sidelines and giving existing homeowners — most of whom have loans below 6% — little incentive to list their properties and find new ones.

In the four weeks through Oct. 5, buyer contracts fell 1.3% from a year earlier, the biggest decline in five months, Redfin reported.

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