Mortgage applications are falling again. Are buyers tired of inflated property prices?

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With mortgage rates sitting at record highs, many buyers rushed to bid for a piece of the stock. But home loan applications actually fell 1.2% for the week ending Dec. 4, reports the Mortgage Bankers Association. This is the second week in a row that we have seen a decline, which could indicate that buyers are fed up with the state of the housing market.

Buyers don’t bite

While there are good deals to be had from a mortgage rate perspective, the housing market itself is a different story. Limited inventory has sent home values ​​skyrocketing as potential buyers bail out and drive prices up via bidding wars. Falling mortgage applications could mean buyers have finally had enough and would rather wait until more homes come on the market and prices come down.

Of course, this begs the question: when will this happen? There is a good chance that the inventory will open up as 2021 progresses, especially if there is progress in controlling the coronavirus pandemic and the country’s economic recovery begins in a meaningful way. And luckily, mortgage rates will likely remain competitive for some time to come, so there’s no need to rush into buying a home right now, especially when it’s likely to mean overpaying.

A limited housing inventory also increases the likelihood of buyers ending up with substandard properties in need of major repairs. Waiting for inventory to open in 2021 could help buyers avoid this fate.

Preparing to buy in the coming year

If you are interested in applying for a mortgage, but agree that this is not the ideal time, use a delay to your advantage. First, take steps to boost your credit score if it’s on the verge of being great. To get the best mortgage rates, you generally need a score in the mid-700s or higher. If your score is below 700, a few smart moves, like correcting mistakes on your credit report or paying off existing debt, could help raise it.

Then pocket more money for a down payment. If house prices don’t drop that much in 2021, the more funds you have at your disposal, the more buying options you will have. Also, it’s a good idea to make at least a 20% down payment on a home to avoid private mortgage insuranceor PMI, an expensive premium that adds to your monthly expenses.

It could very well be that mortgage applications have fallen recently as Americans have chosen to focus on the holidays or deal with the raging pandemic. But it could also be that buyers are finally pushing back and refusing to overpay for homes that were worth much less just a year ago. If you are interested in buying a home, keep an eye on mortgage rates, but also on the housing market. It pays to work with a real estate agent who can track listings and let you know when other options become available in your preferred neighborhood. The more choices you have, the less likely you are to overpay and end up with a home that isn’t ideal for you.

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