The housing market continues its downturn as mortgage applications hit their lowest levels in three decades, according to data issued by the Mortgage Bankers Association (MBA).

Nick Gerli, CEO of Reventure Consulting, pointed to the reality on X, formerly Twitter, noting that current mortgage demand has fallen about 50% compared to pre-pandemic levels in 2019. For sellers, the latest figures are a bad sign as they head into winter, with purchase applications down 49.7% from 2019 levels and 55.2% below 2020 numbers.

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The downturn continues despite favorable conditions that typically boost market activity. Despite two Federal Reserve rate cuts – one in September and another in early November – and the election’s conclusion, buyers remain hesitant to enter the market.

Behind the reluctance is historically poor homebuyer sentiment. The University of Michigan Sentiment Survey data showed that most Americans “believe that high interest rates are weighing down homebuying conditions.” 

According to Gerli, the core issue centers on housing prices. Current home valuations have reached unsustainable levels relative to inflation and income, exceeding the 2006 housing bubble peaks when adjusted for inflation.

The disconnect between perceived value and listing prices drives potential buyers away.

“So buyers look for a home they think should be $350,000. And it costs $500,000,” Gerli said. “And they immediately give up. Because they know the home isn’t worth that amount.”

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Recent MBA data supports Gerli’s assessment. While overall mortgage application volume showed a minimal 0.5% increase last week – the first rise in seven weeks – the average 30-year fixed-rate mortgage climbed to 6.86%, up from 6.81%. Refinancing applications dropped 2% to their lowest point since May despite being 43% higher than the previous year.

Joel Kan, MBA’s deputy chief economist, notes some bright spots in specific market segments. Applications for FHA and VA loans showed respective increases of 3% and 9%, with FHA rates notably declining against the broader trend.

The regional nature of the housing market means some areas may fare better than others. Gerli noted the variations in price forecasts for 2025, particularly between markets like Florida and New York.

For sellers hoping to move properties this winter, the message appears clear – price adjustments may be necessary to attract buyers in the current market environment.

Market dynamics suggest a shift in buyer behavior outside of typical seasonal slowdowns, pointing to deeper structural challenges in the housing market that might require price corrections to resolve.

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