Despite three weeks of falling mortgage rates and an increase in mortgage applications, home affordability remains low.
CNBC reports that the total volume of mortgage applications rose 2 percent last week over the previous week, but remained 19 percent lower than the same week one year ago. While at their lowest level in two months, mortgage interest rates are still 89 basis points higher than a year ago. Combined with rising home prices, buying a home remains unaffordable for many.
While the price gains are now shrinking, affordability is still at the lowest level in a decade and proving to be the biggest barrier to housing demand today; sales of both newly built and existing homes continue to suffer because of it.
Luxury home builder Toll Brothers saw new orders decline this fall, according to its earnings release this week. CEO Douglas Yearley blamed higher mortgage rates and high prices in California, where it sells a large share of its homes. Luxury buyers, it seems, are not exempt from today's weaker affordability, and that is showing up in the size of loans for which borrowers are applying.