Mortgage demand in the U.S. fell to a 27-year low in March, despite record-low interest rates.
According to the Mortgage Bankers Association, mortgage applications dropped 2.2% from a week earlier, with purchase applications falling a record 3.2%. The last time mortgage applications were this low was in 1993, when mortgage interest rates were much higher.
The decline in mortgage demand is surprising, given that mortgage rates hit their lowest ever level of 3.19% in late March. Lower rates are supposed to make it easier for Americans to buy homes. Instead, buyers general reticence and economic uncertainty are causing demand to go down.
The pandemic has changed the way people shop for homes, with many now preferring virtual tours and online events to in-person house showings or open houses. This has made it difficult for homebuyers to feel confident in making a decision or making an offer, slowing the process.
Add to this an unemployment rate that is still historically high, limited inventory, and a rise in home prices, and it’s no surprise why mortgage applications are low.
The uncertain times have caused potential buyers to sit on the sidelines as they wait to feel confident about the future. The result is that the U.S. housing market will likely remain weak for the foreseeable future despite historically low interest rates.