Mortgage applications to buy a new home decreased 11 percent in November 2018, and economists predict a 5 percent dip in new-home sales for the month.
The Mortgage Bankers Association volume data surprised housing market watchers since interest rates dropped in that same time, highlighting the current fundamental weakness. Home builders have been reporting weakness as well in terms of buyer demand; they attribute buyer timidity to a lack of affordability, CNBC reports. Builder confidence, measured by the National Association of Home Builders sentiment index, hit its lowest level in more than two years in November.
"For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction," said the NAHB's chief economist, Robert Dietz, in a release. "While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall."
Home price gains have cooled dramatically in the last six months, and there is growing concern among consumers that buying now would not be the best investment. In some markets, there is a fear that home prices will actually fall in the coming year, so buyers today would lose money.
"Lower house price expectations, tight inventory and a slowing economy will all act as a constraint on housing activity," according to a report from Capital Economics.