Despite a slight drop in mortgage interest rates from 4.8% to 4.76% in the last week of August, total mortgage applications volume dropped -1.7% compared to the previous week. This 4.76% mortgage interest rate was the lowest rate since the week ending June 20, 2018.

When compared to the same week last year, the volume of total mortgage applications was down -15%.

Applications to refinance home loans fell -3% compared with the previous week. Not only did the volume of refinance applications drop -3% from the previous week, the volume of refinance mortgage applications fell -33% compared with the same week last year. True, mortgage interest rates were substantially lower last year, approximately -.75% lower, however, a -33% drop in one year is enough to raise eyebrows.

Purchase applications under the umbrella of mortgage applications declined -1% during the last week of August compare to the week before. Not surprisingly due to an improved economy and strong demand, purchase application volume increased +3% when compared to last year.

Joel Kan, economist with the Mortgage Bankers’ Association, said, “Treasury yields were lower over the week, primarily driven by a release of August 1,2018 Federal Reserve minutes that showed the Fed officials may be taking a more cautious approach to the final two expected rate hikes of 2018”. (Mortgage interest rates tend to walk hand in hand the risings and fallings of Treasury yields.)

Too high home prices seem to be at the crux of steadily declining mortgage application volume. Buyers simply cannot afford ever-climbing home sales price tags. Though the pace of rising prices has slowed somewhat in the last couple of months, home prices are not falling nation-wide.

Aaron Terrazas, senior economist with Zillow, recently told CNBC’s “Power Lunch” crew, ‘Home price appreciation has slowed but (prices) are still rising triple its historic pace and three times the rate of wage growth.”

Terrazas continues to call the market a sellers’ market and will do so “…unless there is a dramatic sift in inventory or a dramatic shift in interest rates.”