March 25 (UPI) -- U.S. mortgage applications fell nearly 30 percent this week, the Mortgage Bankers Association said Wednesday.
The group said the economic shutdown and an average mortgage rate increase last week made homeowners and potential buyers reluctant to enter the market. The average rate is at its highest level since mid-January.
Layoffs, the volatile stock market and deterioration of the short-term economic outlook are factors in the application decline.
"Potential homebuyers might continue to hold off on buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook," said Joel Kan, MBA's associate vice president of economic and industry forecasting, in a statement.
A decline in interest rates, expected as the Federal Reserve pours money into the mortgage-backed securities market, is expected to have little effect on homebuying. Real estate agents have canceled open houses, instead offering virtual home tours, and report a drop in demand.
Purchase applications fell 35 percent last week in New York, 23 percent in California and 17 percent in Washington state, three areas significantly impacted by the outbreak.
"Looking ahead, this week's additional actions taken by the Federal Reserve to restore liquidity and stabilize the mortgage-backed securities market could put downward pressure on mortgage rates, allowing more homeowners the opportunity to refinance," Kan added.