Outside of the COVID lockdown collapse in mortgage applications – where offices were forced to close by the government – this is the weakest level for purchase applications since Nov 2016…

Source: Bloomberg

This should be no surprise since, as Political Calculations details, after reaching a new low for affordability in March 2022, the median new home in the U.S. became even less affordable for the typical American household in April 2022.

That’s especially clear in the following chart. It shows the basic mortgage payment for a median new home as a percentage of median household income rocketed up from 33.8% of that income March to 37.8% in April 2022.

Our next chart confirms the raw affordability of new homes has achieved a new record low.

April 2022’s median household income was just 17.4% of the value of the median new home sold during the month. By this raw measure, new homes have never been less affordable for the period where we have data available.

“Weakness in both purchase and refinance applications pushed the market index down to its lowest level in 22 years. The 30-year fixed rate increased to 5.4 percent after three consecutive declines. While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity. Only government refinances saw a slight increase last week,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

“The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months. These worsening affordability challenges have been particularly hard on prospective first-time buyers.”