The situation is only getting worse: mortgage applications for home purchases fell 7% last week, and were down 21% from a year ago, according to the Mortgage Bankers Association
Potential homebuyers try to get pre-approved for a mortgage, lock in a mortgage rate, and then start looking for a home. This is an indicator of future home sales.
Mortgage rates have risen this year, and home prices have risen to absurdly high levels for years, causing a slew of potential buyers to drop out of the market due to "worsening affordability challenges," as the MBA put it.
And the number of applications to buy a home has dropped to its lowest level since the lockdown began in April 2020. (data via Investing.com).
The Purchase Mortgage Applications Index of the MBA has now fallen below the late-2018 lows.
By November 2018, the Fed had been gradually raising rates for years, and its QT program was in full swing, and mortgage rates had risen above 5%, causing the housing market to shake.
The pace of home sales slowed, prices began to fall in some markets, and stocks began to fall.
With inflation below the Fed's target and Trump, who'd taken control of the Dow, constantly hurling darts at Powell, the Fed signaled in December 2018 that it would cave, and mortgage rates immediately began to fall, and volume and prices skyrocketed.