Mortgage Purchase Applications Drop 4.1 Percent

Mortgage purchase applications declined 4.1 percent from the previous week, according to the Mortgage Bankers Association. The seasonally adjusted Market Composite Index showed a 4.1 percent decrease. The unadjusted index dropped 15 percent due to the Labor Day holiday adjustment. The Refinance Index fell 9 percent week-over-week and sits 65 percent below its level from a year ago. The unadjusted Purchase Index decreased 13 percent from the prior week. It is also 19 percent lower than the same week in 2025.

The 30-year fixed mortgage rate reached 6.97 percent, its highest level since May 2025. Joel Kan, MBA’s VP and Deputy Chief Economist, cited spiking energy prices and high inflation as drivers. These factors pushed bond yields and mortgage rates higher. Buyers paused purchase decisions in response to the rate increase. The high rate environment eliminated the benefit of refinancing for many borrowers. Conventional, FHA, and VA refinance applications all declined.

Inventory Growth Slows Down

Active single-family inventory rose 1.5 percent compared to the same week in 2025. This follows a 4.4 percent increase in the previous week. Inventory remains 8.5 percent below levels from the same week in 2019. The slowdown in inventory growth is a key trend for 2026. The 7-day median list price is down 2 percent year-over-year. Prices have remained mostly unchanged over the last four years, aside from seasonal swings.

High mortgage rates above 7 percent are likely to slow existing home sales. House prices face downward pressure as demand weakens. The combination of slowing inventory growth and weak demand creates a challenging market. These trends are consistent with data from GN auto markets and housing mortgage rates. The market shows signs of cooling despite persistent cost pressures.

Builder Sentiment Drops to 32

Builder confidence in the market for newly built single-family homes fell three points to 32. This data comes from the NAHB/Wells Fargo Housing Market Index released in September. Higher mortgage rates are weighing on builder sentiment. Worsening labor shortages are also impacting the sector. Rising material costs contribute to the decline in confidence. Buyer traffic has weakened across much of the country. Bill Owens, NAHB Chairman, attributed the drop largely to rising mortgage rates.

Market Conditions Remain Tight

The data indicates a market under pressure from multiple fronts. Mortgage rates are at multi-year highs. Application volumes are falling across purchase and refinance categories. Inventory growth is decelerating. Builder sentiment is at low levels. These factors combine to create a restrictive environment for housing activity. The market is adjusting to higher borrowing costs. Future trends will depend on interest rate movements and economic conditions.