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The latest report from the Mortgage Bankers Association shows that mortgage application volume was down two percent last week, despite relatively lower rates.

Lack of homebuyers was identified as the main cause of the drop, the report concludes, as applications for a mortgage to buy a home declined three percent annually, and purchase volume has dropped for five consecutive weeks as annual losses continue to grow, CNBC reports. Buyers are discouraged by the enduring imbalance between supply and demand that has pushed up home prices and crimped affordability.

Mortgage rates did fall slightly last week, but not enough to improve affordability much. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.81 percent from 4.84 percent for loans with 20 percent down payments. "Strong inflation was overshadowed by ongoing trade tensions between the U.S. and China, along with concerns over Turkey's currency situation. This helped push Treasury rates down by 3 basis points last week," said Joel Kan, MBA associate vice president of economic and industry forecasting.

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