Homebuyer demand for mortgages is now at the lowest level in 30 years, according to data from the real estate analytics tool Reventure App.
Newsweek contacted the Mortgage Bankers Association for comment by email on Tuesday outside standard working hours.
Why It Matters
Mortgage rates may be a significant factor this year to determine whether the housing market will become more affordable for Americans, something President-elect Donald Trump is expected to strive for—though Reventure's data suggests that many remain cautious as they wait for rates to drop further.
What To Know
The sudden spiraling of mortgage rates after the end of the COVID-19 pandemic, which followed the Federal Reserve's efforts to slow down the rise of inflation, exacerbated the affordability crisis in the U.S. housing market over the past few years.
Despite slowly growing inventory in 2024 and the central bank's decision to cut its key interest rate—a move that should bring mortgages down—a chronic lack of supply has kept prices across the country up even as demand for houses and sales have dwindled.
According to Reventure's data, which compiles information from the Mortgage Bankers Association and Investing.com, mortgage applications are down 63 percent from their pandemic peak.
"The principal issue right now for buyers is a lack of affordability. With the typical US homebuyer facing a mortgage payment that takes up nearly 40 percent of their gross income if they buy right now," Nick Gerli, a real estate analyst and the CEO of Reventure App, wrote on X, formerly Twitter, commenting on the data.
"The last time we saw demand this low, it was 1995," Gerli wrote on Monday. "It's truly shocking just how much demand has dropped."
He added in a follow-up post that through the first week of January, mortgage applications were down by 14 percent from the same week last year, 19 percent from 2023, 54 percent from 2022, 59 percent from 2021 and 52 percent from 2020.
Homebuyer demand has plummeted to the lowest level in 30 years.
With mortgage applications to purchase down 63% from the pandemic peak.
The last time we saw demand this low, it was 1995. pic.twitter.com/g0OsFiv5Nr
"Mind you—this is coming four months after the Fed cut rates for the first time. With another 2 rate cuts thrown in. Plus the presidential election being settled," Gerli added in another post, listing factors that were considered to be keeping homebuyers on the side of the housing market.
"Despite all those seeming tailwinds for the housing market, demand is still in the basement," Gerli continued.
What People Are Saying
Kara Ng, a senior economist at Zillow, previously told Newsweek: "Buyers should be ready for a year with plenty of ups and downs with mortgage rates … We can expect a lot of ups and downs with mortgage rates throughout the year, as both the Fed and markets will be in reaction mode as new data comes in."
Matthew Walsh, an economist at Moody's Analytics, previously told Newsweek: "To give a sense of how low affordability is and how that will weigh on housing demand, we would need to see incomes rise by about 70 percent or home prices fall by about 40 percent or the mortgage rate decline by 4.6 percentage points to restore the level of housing affordability that we saw in 2019."
What Happens Next
Gerli said the drop in mortgage applications compared to the pandemic years set the stage for "an interesting start to 2025" for the U.S. housing market.
"The buyer demand is still very depressed, coming at a time when sellers have been told the market would be improving due to rate cuts and the election being over," he wrote on X, suggesting that 2025 could see the start of a "raft of price cuts."
Prices are already beginning to slide down in areas of the country where inventory is growing and demand has slowed down, as in cities in Florida and Texas. "Some major softness is now revealing it self in certain US Housing Markets, where prices are beginning to drop," Gerli wrote.
"They include Texas and Florida, and might soon also include states like Tennessee, Colorado, Arizona, Utah, Alabama, and Georgia," he added. "These are the areas where price growth was lowest to close out 2024."
The real estate analyst said it wouldn't be a surprise if "home price growth slows significantly in 2025 on a national level." He added: "Potentially settling around 0-1 percent YoY for the nation. While values drop in about 10-12 different Sun Belt and Mountain West states."
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