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Single-family home building may have shown resilience during a period of rising interest rates, but the mortgage market hasn't fared so well. The U.S. mortgage market is currently facing one of its largest downturns in history, according to the ResiClub blog. Mortgage purchase applications have been at multi-decade lows since 2022. The decline in mortgage applications is due to the lock-in effect created by high housing costs. Many would-be sellers are choosing to keep their current 2% or 3% mortgage rates rather than trade them for a higher rate of 6% or 7%.
This mortgage recession, in terms of transactions, is likely passing through some form of a trough. While we’re not seeing a recovery yet, we also aren’t seeing a bigger decline. Instead, we’re just hovering at low levels.
In order to get a real recovery in the mortgage sector, lower mortgage rates are needed.
That could spur:
- More refinancing
- Easing the "lock-in effect" and increasing churn in the resale market
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